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 BOARD MEETING

 STATE OF CALIFORNIA

 AIR RESOURCES BOARD

 JOE SERNA, JR. BUILDING

 CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

 CENTRAL VALLEY AUDITORIUM, SECOND FLOOR

 1001 I STREET

 SACRAMENTO, CALIFORNIA

 THURSDAY, MARCH 22, 2007

 9:00 A.M.

 TIFFANY C. KRAFT, CSR, RPR

 CERTIFIED SHORTHAND REPORTER

 LICENSE NUMBER 12277

 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345
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 ii

 APPEARANCES

 BOARD MEMBERS

 Dr. Robert Sawyer, Chairperson

 Ms. Sandra Berg

 Ms. Dorene D'Adamo

 Dr. Henry Gong, Jr.

 Supervisor Jerry Hill

 Ms. Lydia H. Kennard

 Mrs. Barbara Riordan

 Supervisor Ron Roberts

 Dr. Daniel Sperling

 STAFF

 Mr. Tom Cackette, Chief Deputy Executive Officer

 Mr. Tom Jennings, Chief Counsel

 Mr. Michael Scheible, Deputy Executive Officer

 Ms. Lynn Terry, Deputy Executive Officer

 Ms. Kathleen Quetin, Ombudsman

 Ms. Catherine Witherspoon, Executive Officer

 Ms. Lori Andreoni, Board Secretary

 Mr. Bob Fletcher, Chief, Stationary Source Division

 Mr. Kurt Karperos, Chief, Air Quality and Transportation

 Planning Branch

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 iii

 APPEARANCES CONTINUED

 STAFF

 Mr. Mike Tollstrup, Chief, Project Assessmnet Branch, SSD

 Mr. Tom Valencia, Air Pollution Specialist, Field

 Inspection and Testing Section, MSOD

 ALSO PRESENT

 Ms. Pamela Amette, Motorcycle Industry Council

 Mr. Joseph Bishop, Trafficbulldog.com

 Mr. Jeffrey Bossert Clark, Kirkland & Ellis, LLP

 Mr. Vaughn Burns, DaimlerChrysler

 Mr. John Cabaniss, Association of International Automobile

 Manufacturers

 Ms. Elaine Chang, South Coast AQMD

 Mr. Christi Collins, American Concrete Pumping

 Mr. Howard Cooper, Cooper Crane & Rigging

 Mr. Mike Cusack, Congo Pumping

 Mr. Bill Davis, SCCA/ACPA/EVCA

 Mr. Glenn Davis, GDA Enterprises

 Mr. Dan Dresser, ARB, Inc.

 Mr. Steven Douglas, Alliance of Automobile Manufacturers

 Mr. Linus Farias, CCEEB

 Mr. Philip Fournier, ASC of California, Chapter 32

 Mr. Paul Frech

 Mr. Alvan Mangalndan, Crane Owners Association

 Mr. Roger Gault, EMA
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 APPEARANCES CONTINUED

 ALSO PRESENT

 Mr. Michael Graboski, American Rental Association

 Mr. Seth Hammond, Specialty Crane & Rigging

 Mr. Henry Hogo, South Coast AQMD

 Ms. Bonnie Holmes-Gen, American Lung Association

 Mr. Patrick Hurley, Citizen

 Mr. Doug Korthof, general public

 Mr. Danny Luong, South Coast AQMD

 Mr. Michael Lewis, Construction Industry Air Quality

 Coalition

 Mr. Allan Lind, CCEEB

 Mr. Aaron Lowe, AAIA

 Mr. Bill Magavern, Sierra Club of California

 Mr. Tony Martino, General Motors

 Mr. Zerkis Martirosian, Automotive Service Council,

 Chapter 25

 Mr. Jim O'Neil

 Mr. Larry Nobriga, ACSSA

 Mr. David Patterson, Mitsubishi

 Mr. Allen Pennebaker, ASCCIA

 Mr. Norman Plotkin, CAWA

 Mr. Alan Prescott, Ford

 Mr. Bud Rice

 Mr. David Rudin, ACPA/Putzmeister, Inc.

 Ms. Sara Rudy, Ford
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 APPEARANCES CONTINUED

 ALSO PRESENT

 Mr. James Thomas, Nabors Well Services, Inc.

 Mr. Doug Van Allen, BJ Services Co.

 Mr. Barry Wallerstein, South Coast AQMD

 Mr. Robert Wilder, Citizen

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 INDEX

 PAGE

 Pledge of Allegiance 1

 Item 7-3-1

 Chairperson Sawyer 4

 Executive Officer Witherspoon 5

 Staff Presentation 5

 Mr. Bishop 19

 Mr. Korthof 23

 Item 7-3-2

 Chairperson Sawyer 26

 Executive Officer Witherspoon 26

 Deputy Executive Officer Terry 29

 Staff Presentation 31

 Q&A

 Dr. Wallerstein 56

 Dr. Chang 60

 Mr. Bishop 67

 Ms. Holmes-Gen 68

 Mr. Magavern 71

 Mr. Korthof 72

 Item 6-11-5

 Chairperson Sawyer 75

 Executive Officer Witherspoon 75
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 Staff Presentation 79

 Ombudsman Quetin 96

 Q&A 97

 Mr. Douglas 111

 Mr. Patterson 114

 Ms. Rudy 125

 Mr. Martino 130

 Mr. Prescott 132

 Mr. Clark 135

 Mr. Cabaniss 144

 Ms. Amette 146

 Mr. Gault 148

 Mr. Lowe 150

 Mr. Pennebaker 154

 Mr. Martirosian 157

 Mr. Davis 160

 Mr. Rice 162

 Mr. O'Neil 164

 Mr. Nobriga 167

 Mr. Plotkin 171

 Mr. Burns 174

 Mr. Korthof 178

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 INDEX CONTINUED

 PAGE

 Mr. Hogo 181

 Mr. Magavern 182

 Ex Partes 184

 Motion 188

 Vote 188

 Item 7-3-3 and 7-3-4

 Chairperson Sawyer 189

 Executive Officer Witherspoon 190

 Staff Presentation 192

 Ombudsman Quetin 202

 Mr. Wilder 207

 Mr. Hurley 208

 Mr. Cusack 212

 Ms. Collins 214

 Mr. Graboski 218

 Mr. Davis 226

 Mr. Rudin 231

 Mr. Lind 233
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 Mr. Farias 243

 Mr. Hammond 244

 Mr. Cooper 245

 Mr. Mangalindan 247

 Mr. Korthof 248

 Mr. Dresser 250

 Mr. Van Allen 251

 Mr. Thomas 253

 Mr. Luong 255

 Mr. Lewis 256

 Ex Parte 259

 Motion 260

 Vote 261

 Motion 261

 Vote 261

 Public Comment

 Mr. Korthof 263

 Ms. Whitman 266

 Mr. Davis 269

 Adjournment 270

 Reporter's Certificate 271

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 1 PROCEEDINGS

 2 CHAIRPERSON SAWYER: The March 22nd, 2007, public

 3 meeting of the Air Resources Board will now come to order.

 4 All please rise and join me in the Pledge of

 5 Allegiance.

 6 (Thereupon the Pledge of Allegiance was

 7 recited in unison.)

 8 CHAIRPERSON SAWYER: Thank you.

 9 Will the Clerk of the Board please call the role?

10 BOARD CLERK ANDREONI: Ms. Berg?

11 BOARD MEMBER BERG: Here.

12 BOARD CLERK ANDREONI: Ms. D'Adamo?
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13 BOARD MEMBER D'ADAMO: Here.

14 BOARD CLERK ANDREONI: Dr. Gong?

15 BOARD MEMBER GONG: Here.

16 BOARD CLERK ANDREONI: Supervisor Hill?

17 BOARD MEMBER HILL: Here.

18 BOARD CLERK ANDREONI: Ms. Kennard?

19 BOARD MEMBER KENNARD: Here.

20 BOARD CLERK ANDREONI: Mayor Loveridge?

21 Mrs. Riordan?

22 BOARD MEMBER RIORDAN: Here.

23 BOARD CLERK ANDREONI: Supervisor Roberts?

24 Dr. Sawyer?

25 CHAIRPERSON SAWYER: Here.

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 1 BOARD CLERK ANDREONI: Professor Sperling?

 2 BOARD MEMBER SPERLING: Here.

 3 BOARD CLERK ANDREONI: Mr. Chairman, we have a

 4 quorum.

 5 CHAIRPERSON SAWYER: Thank you.

 6 I have a few opening remarks.

 7 I spent the first part of this week meeting with

 8 the Ventura, Santa Barbara, and San Luis Obispo Air

 9 Quality Management Districts. This is part of my plan to

10 visit all of the districts in the state. And the

11 objective was to learn of their concerns. And it was a
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12 very productive meeting.

13 Also in Santa Barbara I attended a conference

14 entitled, "Navigating in the New Carbon World," hosted by

15 the California Climate Action Registry, Cal/EPA, and the

16 Air Resources Board. Board Member Barbara Riordan was

17 there as well, and she serves as a member of the Board of

18 Directors of the registry and I think has since its

19 beginning.

20 BOARD MEMBER RIORDAN: Not since its beginning.

21 CHAIRPERSON SAWYER: Okay. A message expressed

22 clearly and repeatedly is that the business community is

23 anxious about what is going to happen next. The

24 California Global Warming Solutions Act of 2006, AB 32,

25 leaves many policy questions unanswered. The rules we

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 1 adopt will establish where and when greenhouse gas

 2 reductions will occur, who will bear the burdens, who will

 3 have new business opportunities and much more. Business

 4 wants to plan its future in a carbon-constrained world.

 5 I and the staff were pressed for answers about

 6 what is going to happen over the next few years.

 7 Obviously, we cannot answer those questions since we have

 8 not made any major policy decisions yet.

 9 The Air Resources Board must be clear on the

10 principles we will follow: For example, to reward early
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11 action; to establish fair and equitable rules; to assist

12 these who will be responsible to meeting AB 32 goals. To

13 this end, and with the concurrence of the Board members, I

14 would ask the staff to draft a statement of principles to

15 guide our implementation of AB 32 and to place this item

16 on the agenda of our next meeting for our discussion.

17 Do I have your agreement, Board members?

18 (Yeses)

19 CHAIRPERSON SAWYER: Thank you very much.

20 Now for the standard logistical announcements.

21 The closed session noticed for today's meeting is

22 canceled. We will put a closed session on our agenda each

23 month to deal with possible issues arising from the

24 various greenhouse gas lawsuits to which we are a party.

25 Because of delays in hearing these lawsuits, there is

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 1 nothing to report or discuss at this time. Anyone in the

 2 audience who wishes to testify should sign up with the

 3 Board Clerk. You have the option to include your name or

 4 not. Please see the Clerk of the Board for further

 5 instructions.

 6 Speakers, the Board will impose as is our usual

 7 policy a three-minute limit upon presentations. Please

 8 put your testimony into your own words. It is easier for

 9 the Board to follow if you go straight to your main
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10 points. You do not need to read your written testimony as

11 it will be entered into the record.

12 For safety reasons, please note the emergency

13 exits to the right of the hearing room and to the rear.

14 In the event of a fire alarm, we are required to evacuate

15 this room immediately. Evacuees will exit down the

16 stairways and possibly to a relocation site across the

17 street. When the all-clear signal is given, we will

18 return to the hearing room and resume the hearing. Thank

19 you for your attention.

20 Agenda Item 7-3-1, Informational Health Update.

21 The Air Resources Board staff provides the Board with

22 regular updates on current research findings on the health

23 effects of air pollution. Today's presentation will

24 report the findings of a recent study of California's

25 children and the effects on their lung development from

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 1 living near freeways.

 2 Ms. Witherspoon, please introduce this item.

 3 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr.

 4 Sawyer. Good morning, members of the Board.

 5 In May of 2005, this Board approved land use

 6 guidance to protect communities which recommended that

 7 development be held back 500 feet from major freeways and

 8 roadways. And the presentation you're about to hear
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 9 underscores how wise that decision was.

10 We have presented to you one by one each of the

11 traffic exposure studies that has been done in California

12 and around the world as they were published. Today, we

13 are bringing them all into one place so that you can see

14 the myriad of effects to infants, children, women, and

15 seniors all in one place. And it is quite impressive when

16 looked at all together.

17 The staff presentation will be made by Dr. Susan

18 Gilbreath from our Health and Exposure Assessment Branch.

19 Dr. Gilbreath.

20 (Thereupon an overhead presentation was

21 presented as follows.)

22 DR. GILBREATH: Thank you, Ms. Witherspoon. Good

23 morning, Dr. Sawyer and members of the Board.

24 In this health update, I'm going to discuss the

25 health effects of traffic-related air pollution. This

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 1 subject has recently received much media attention and is

 2 an important research priority at ARB. I will focus the

 3 discussion on effects seen in one of our most vulnerable

 4 populations, our children. I will begin my presentation

 5 with a discussion on new findings from the Southern

 6 California Children's Health Study Cohort relating traffic

 7 exposure to lung development. Then I will follow up with
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 8 recent studies that support the findings of adverse health

 9 effects in children. But first I will talk about some of

10 the things that make traffic pollution hazardous.

11 --o0o--

12 DR. GILBREATH: The power to move a vehicle comes

13 from burning fuel. Pollution comes from byproducts of

14 this combustion and from evaporation of the fuel itself.

15 Incomplete combustion results in carbon monoxide and

16 hydrocarbons. Oxides of nitrogen, or NOx, form after heat

17 causes oxygen and nitrogen in the air to combine. Diesel

18 exhaust is one of the primary contributors to particulate

19 matter. Gasoline contains several toxics such as benzene

20 and formaldehyde. Motor vehicles also generate particles

21 through wear and degradation of tires, brakes, and other

22 components and contribute to dust pollution by

23 resuspending dust in the air. We know all these

24 pollutants can be toxic to human health, particularly our

25 children and other susceptible populations.

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 1 --o0o--

 2 DR. GILBREATH: The findings I'm going to discuss

 3 today are the latest to come from the Southern California

 4 Children's Health Study, the longest U.S. investigation

 5 into air pollution and children's health. Originally

 6 funded by ARB, this study has tracked children's
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 7 respiratory health since 1992 and is currently being

 8 funded by the National Institute of Environmental Health

 9 Sciences. The study looked at air pollution impacts on

10 over 5500 children who were recruited from schools in

11 twelve southern California communities that were chosen

12 for their differing pollution profiles.

13 Measurements from these children include annual

14 lung function test and the administration of

15 questionnaires. Several groundbreaking results and over

16 100 peer reviewed articles have emerged from this study.

17 We now know that air pollution can affect children's lung

18 function and growth and the occurrence and severity of

19 asthma. Children exposed to pollution miss more school

20 days because of respiratory symptoms while children who

21 relocate to cleaner regions experience improvements in

22 their lung function.

23 --o0o--

24 DR. GILBREATH: Dr. Gauderman and his colleagues

25 studied a subset of 1500 children that had complete follow

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 1 up from 10 through 18 years of age. Residential proximity

 2 to freeways was compared to lung function development over

 3 an eight-year period.

 4 --o0o--

 5 DR. GILBREATH: The children's lung function
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 6 measurements were categorized according to distance of

 7 their homes from freeways. The red bars represent the

 8 lung function of those living within 500 meters of the

 9 freeway. The yellow bar shows the average function of

10 those living 500 to 1,000 meters away, while the green

11 bars shows the function of those living 1,000 to 1500

12 meters away. These are all in reference to the lung

13 function of those living further than 1500 meters from

14 freeways.

15 The asterisks indicate the differences that are

16 statistically significant. The researchers found

17 significant decreases in lung function in 18-year-olds who

18 lived within 500 meters of a freeway compared to those who

19 live more than 1500 meters away. This is shown by the

20 bars on the left side of the graph.

21 The bars on the right side of the graph show the

22 average differences in lung development over the eight

23 years of follow up. For example, eight-year lung growth

24 in a child living within 500 meters of a freeway was about

25 five percent less than an individual living more than 1500

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 1 meters away. Notice how the decreases in lung function

 2 and growth diminished as the children's residential

 3 distance from the freeway increased.

 4 --o0o--
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 5 DR. GILBREATH: Further analyses of the data

 6 indicated that children exposed to traffic in highly

 7 polluted areas experience a combination of developmental

 8 effects. Even in areas with low regional pollution,

 9 children living near major roadways still suffered from

10 lung growth deficits.

11 The lung function in 18-year-olds living closest

12 to the freeway was about six percent less than those

13 living further away. Clinical symptoms are generally not

14 apparent until a 10 to 20 percent reduction has occurred.

15 A symptomatic individual will probably not attempt to

16 limit their exposures, leaving them susceptible to further

17 damage. In sensitive persons, reduced lung function may

18 increase the risk of respiratory illness or increase the

19 severity of symptoms.

20 18-year-olds are near the end of their

21 development, and it is unlikely they will ever regain the

22 function that has been lost. They are starting out their

23 adult life at a respiratory disadvantage and may have a

24 greater risk of complication later in life.

25 --o0o--

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 1 DR. GILBREATH: This graph demonstrates a little

 2 more about lung function. This red line on the slide

 3 illustrates the generalized average growth of a person's
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 4 lung function during their life. Early lung function

 5 development shows rapid growth and naturally plateaus

 6 until a person's late 20s, after which a decline of about

 7 one percent per year occurs.

 8 The yellow line is an approximation of when

 9 symptoms will occur. The solid green line demonstrates

10 the approximate deficit in lung function found in the

11 current study. The dotted portion of the green line

12 projects lung function in later life and assumes future

13 declines are not exasperated by continued environmental

14 insults.

15 If the growth follows this projected pathway,

16 when the children who live near the freeways turn 40 years

17 old, their lung function will be closer to that of a

18 50-year-old.

19 To put the current children's health study

20 findings in context to other traffic studies, I am going

21 to now briefly discuss how these studies are performed and

22 compare other important results from other traffic-related

23 pollution studies among children in California.

24 --o0o--

25 DR. GILBREATH: Exposure to pollution can be

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 1 measured by examining ambient levels of traffic-related

 2 pollutants, residential distance to a freeway, the number
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 3 of vehicles on the road, or the ratio of cars and trucks

 4 using the roads. Models have also been used to estimate

 5 personal exposure traffic.

 6 Another type of traffic study examines in-vehicle

 7 exposures. The Air Resources Board recently announced

 8 that on average Californians spend 6 percent of their days

 9 commuting but receive 60 percent of their exposures to

10 harmful ultra fine particles during this time.

11 --o0o--

12 DR. GILBREATH: One of our most vulnerable

13 populations are infants and those children not yet born.

14 A Los Angeles study on the prenatal effects of traffic by

15 Wilhelm and colleagues found that pregnant women living

16 near heavy traffic areas with high levels of carbon

17 monoxide were more likely to experience adverse birth

18 outcomes. The proportion of low birth weight babies

19 increased from a base line of 7 percent to 9 percent and

20 pre-term births went from 11 percent to 14 percent among

21 the most highly exposed women. Ritz and colleagues found

22 that pregnant women with high traffic exposure were three

23 times as likely to have a child born with certain heart

24 defects as women breathing the cleanest area.

25 --o0o--

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 1 DR. GILBREATH: Children are active. They spend
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 2 more time outdoors and their breathing rates are higher,

 3 so they will receive more exposure to air pollution than

 4 adults under the same circumstances. In another report

 5 from the children's health study, researchers found that

 6 children living close to the freeway were 89 percent more

 7 likely to be diagnosed with asthma than children living

 8 furthest away. 8.6 percent of children living in the

 9 South Coast air basin have asthma. An 89 percent increase

10 in risk would correspond to an asthma prevalence of 16

11 percent in children near freeways.

12 Another California study published by McConnell

13 and colleagues found that children living within 75 meters

14 of a major road were more likely to have ever been

15 diagnosed with asthma, two and a half times more likely to

16 have used prescribed medication to treat their asthma

17 within the last year, and 2.7 times more likely to report

18 wheezing than those children living greater than 300

19 meters away from traffic.

20 A study in the East Bay by Kim and colleagues

21 found an increase in bronchitis symptoms and asthma among

22 children attending schools in areas with higher levels of

23 traffic-related pollutants.

24 --o0o--

25 DR. GILBREATH: ARB is currently funding several

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 1 studies that will add to the growing body of literature on

 2 the effects of traffic on health. One of the studies is a

 3 refinement of the East Bay Children's Respiratory Health

 4 Study examining the association between traffic pollution

 5 and respiratory health among children living and attending

 6 schools at varying distances from high traffic roads.

 7 Another study is examining the effects of travel

 8 exposure on cardiovascular function in elderly subjects

 9 during freeway travel.

10 The third study listed explores the effects of

11 long-term exposure from air pollution including traffic

12 and the development of cardiovascular and cardiopulmonary

13 diseases and mortality in a cohort of elderly teachers.

14 At the May Board hearing, you'll hear proposals for some

15 new traffic-related research.

16 --o0o--

17 DR. GILBREATH: The Air Resources Board has taken

18 many regulatory actions to mitigate the health problems

19 associated with traffic pollution. The Board approved the

20 Diesel Risk Reduction Plan to reduce particulate matter

21 emissions from diesel fueled engines in vehicles in 2000.

22 Tighter emission standards for heavy-duty diesel trucks

23 took effect this year. And in February of this year, the

24 Clear Air Task Force suggested the rest of the

25 United States follow California's lead in creating the

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 1 Carl Moyer Program to provide the money necessary to

 2 retrofit existing dirty diesel fleets.

 3 Smog checks are used for passenger vehicles, and

 4 tighter standards for cars and light trucks will be

 5 implemented in 2009.

 6 In April 2006, the ARB's Goods Movement Emission

 7 Reduction Plan was approved, which is a comprehensive plan

 8 to limit emissions from diesel engines associated with the

 9 goods movement industry.

10 This plan is part of the State's overall Goods

11 Movement Action Plan unveiled by Cal/EPA in January of

12 this year to improve goods movement, reduce congestion,

13 and improve air quality associated with moving goods via

14 the state's highways as well as railways and ports.

15 Land use guidelines were issued in 2005 to

16 highlight the potential health impacts associated with

17 proximity to air pollution sources so that planners can

18 explicitly consider these issues in planning processes.

19 Results from the East Bay Children's Study help

20 support the passage of a school siting bill which amends

21 the Education Code to ensure that new school sites are

22 prohibited within 500 feet from the edge of the closest

23 traffic lane of a freeway or other busy traffic corridors.

24 Our continued research and these methods will help protect

25 our most vulnerable populations from traffic-related air
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 1 pollution.

 2 --o0o--

 3 DR. GILBREATH: This concludes my presentation.

 4 I'll be happy to answer any questions.

 5 CHAIRPERSON SAWYER: Thank you, Dr. Gilbreath.

 6 Do Board members have any questions?

 7 Supervisor Hill.

 8 SUPERVISOR HILL: Thank you, Dr. Saywer.

 9 Question related to the land use decisions and

10 the land use planning. There seems to be -- when you look

11 at current thinking with transit-oriented development and

12 in most areas now trying to locate or attempt to locate

13 housing close to transit hubs and transit arteries -- and

14 I don't know if the message that we're trying to

15 communicate is getting where it should to those planning

16 entities and counties and cities throughout the state that

17 are looking at that. I don't know what the solution is,

18 because the effort is to try to locate residents in that

19 area to avoid the sprawl that seems to be taking place in

20 some areas.

21 It's more of a statement than a question. But I

22 don't know what we can to try to communicate this message,

23 and the facts we saw today are just overwhelming I think

24 in support of that position.

25 EXECUTIVE OFFICER WITHERSPOON: Supervisor Hill,
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 1 we struggled with that issues, because we were among the

 2 advocates of PODS and TODS, Pedestrian Oriented

 3 Development and Transit Oriented Development, and we still

 4 are. But we would configure them somewhat differently

 5 than some of those projects have been done in the past.

 6 We would have the transit hub directly on the traffic

 7 lane, the parking behind it, and the residential

 8 facilities further back still, instead of stacking them

 9 which is done in some instances with apartments directly

10 above the lane right next to the freeway and that sort of

11 thing. Or have services but not people living year round,

12 24 hours a day in these facilities.

13 And so we've had lots of conversations with

14 developers who've asked us, "Are there abatement methods?"

15 And there are not that we've been able to identify. No

16 particulate ventilation. We have said your intake should

17 be on the far side, not the near side of the freeway where

18 you can switch egress in and out to have the traffic

19 pattern be away from the residential activities. These

20 are the kinds of things that are going on.

21 But it was shocking to many of enlightened

22 transportation planners and enlightened land use planners

23 that this too needed to be carefully scrutinized. They

24 thought they were doing the very right thing.
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25 SUPERVISOR HILL: I don't know if the message is

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 1 getting to those planning -- looking at the Bay Area, the

 2 Association of Bay Area Governments which is using the

 3 smart growth theme. And I think we could highlight it or

 4 communicate more often to them on this issue and some of

 5 the facts we saw today would be helpful as they go out to

 6 the region and develop those transit hubs and

 7 opportunities.

 8 EXECUTIVE OFFICER WITHERSPOON: We're also

 9 working with air districts to spread the news. They're

10 our biggest advocates.

11 SUPERVISOR HILL: That's a wonderful place to

12 start. Thank you.

13 CHAIRPERSON SAWYER: Dr. Gong.

14 BOARD MEMBER GONG: I just wanted to applaud the

15 presenter and the nice presentation in general. I think

16 it nicely summarizes the efforts of the ARB in looking at

17 the health effects of traffic. And traffic is sort of

18 synonymous with urban California.

19 I'd also like to specifically for the record

20 congratulate the Research Division of ARB for fostering

21 and supporting many of these traffic-related studies. I

22 think the end result is that California and its citizens

23 are probably the leaders in this area of traffic-related
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24 health effects. And I'm glad to see that more efforts are

25 going to be underway in the near future and also in the

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 1 far future so to speak.

 2 I did have one specific comment about slide

 3 number five. I think slide number five is a beautiful

 4 representation. Can that be shown? So everyone knows

 5 what I think is beautiful.

 6 --o0o--

 7 BOARD MEMBER GONG: Not just the colors, but

 8 actually the bars here actually tell me two stories. One

 9 is as you presented that there is more reduction in lung

10 function the closer you live to the freeway, particularly

11 if you're less than 500 meters in the red there. But I

12 also see if you look at the yellow and even the green

13 bars, there are reductions in lung function there as well.

14 And I assume that this is not so much related to traffic,

15 but perhaps to regional air pollution in those areas,

16 which also makes me say, yes, we need to be worried about

17 traffic. But there are also other reasons to be worried

18 about other types of air pollution in the region. And I

19 think this is good demonstration of that, unless I'm off

20 base. Any comments?

21 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

22 Well, Dr. Gong, I think that was one of the findings out
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23 of the study is they found the independent effect for

24 traffic. So they actually stated, the investigators, that

25 they found both. This is worrisome. Because their

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 1 previous papers they found this what they considered a

 2 permanent lung function deficit in regards to general

 3 regional air pollution. Now they're finding an

 4 independent effect for traffic and for local impacts as

 5 well. So they're concerned -- one of the bottom lines was

 6 people living near heavy roadways with bad regional air

 7 pollution are almost getting a double whammy, and a double

 8 dose of bad air pollution and probably would have the

 9 greatest lung function deficits of all.

10 BOARD MEMBER GONG: This is a beautiful slide,

11 because it shows the two dimensions that you've mentioned.

12 Certainly, I'm going to be using this in my teachings.

13 Thank you.

14 CHAIRPERSON SAWYER: Are there any other

15 questions from Board members?

16 I have two witnesses that would like to speak on

17 this item. I notice the topic of one and perhaps both of

18 the speakers may not be exactly on this issue. If you

19 feel that what you want to say is pertinent to this, fine.

20 If not, perhaps it would be better to put it in the

21 general comment period. I leave that up to you.
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22 The first speaker is Joseph Bishop, followed by

23 Doug Korthof.

24 MR. BISHOP: Good morning. My name is Joseph

25 Bishop. I'm the founder of trafficbulldog.org. Today's

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 1 presentation can be found on trafficbulldog.org.

 2 Lawsuits are the great equalizer in America. For

 3 if there is an injustice, a lawsuit is always an option.

 4 As we move forward with the Assembly Bill 32, I am deeply

 5 concerned a lawsuit is required to wake up the state of

 6 California from allowing the illegal ongoing conflict of

 7 interest at our regional transportation authorities. I

 8 find it fascinating a state like California, so addicted

 9 to this sales tax revenue from vehicle sales and gasoline,

10 would sue the auto manufacturers for global warming

11 damages.

12 The State of California has certainly played a

13 key role in the buildup to our current crisis. The State

14 of California relies heavily on sales tax revenue from

15 vehicle sales. To illustrate, just last week, the County

16 of Sacramento offered a sweet deal of $1,000,000 for an

17 auto dealer to stay in the county. Why does the county

18 government love the auto dealer so much? Because new

19 vehicle sales generate 20 percent of the sales tax revenue

20 for the county.
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21 Many other examples of the government's

22 co-dependence on sales tax of vehicle sales include

23 providing auto dealers free land for building dealerships,

24 providing auto dealerships free land for parking their

25 unsold inventory; allowing auto dealers exemptions from

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 1 city and county signage laws so that enormous auto mall

 2 signs can grab the attention of everyone within miles.

 3 And of course the illegal conflict of interest that keeps

 4 carpooling in check.

 5 So as I look at California's suit against the

 6 auto manufacturers for global warming damages, the irony

 7 actually give me indigestion. Here we have a government

 8 that actively works to help increase the number of new

 9 vehicles sold in the state of California. And then at the

10 same time, the government is turning around and suing the

11 auto manufacturers for contributing to global warming. It

12 is fascinating the state has recognized the potential for

13 suits and is making a preemptive strike against the auto

14 manufacturers for all future claims against the state

15 related to global warming damages.

16 So I have to ask: Should I expect the State of

17 California to sue me for operating my SUV? I also have to

18 ask, should I sue the State of California for its effort

19 in increasing vehicle sales? After all, there is a
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20 serious addiction that needs to be addressed.

21 Well, it may be difficult to sue the State just

22 for the increased vehicle sales. However, ongoing illegal

23 conflict of interest by our regional transportation

24 authorities does leave the State open to valid claims.

25 The State of California through the Department of

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 1 Transportation allows the regional transportation

 2 authorities to operate this illegal ongoing conflict of

 3 interest. Also to date, I have not seen or heard of any

 4 government officials actually taking action to combat the

 5 problem.

 6 So if a suit against the State is the answer,

 7 let's eliminate some of the potential claims. A class

 8 action suit by the 25 percent of Californians suffering

 9 from asthma. What is it worth to the young child

10 struggling to breathe at night? What is it worth to the

11 parent watching their child suffer? Take that number,

12 multiply it by eight million, it's likely to be a

13 multi-trillion dollar claim against the State. A class

14 action suit by all of the South Coast Air District

15 residents that continue to live in a non-attainment area.

16 The lawsuit would be based on the fear of developing lung

17 cancer and other related diseases from exposure to vehicle

18 exhaust pollution. Are new vehicle purchases really the
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19 only way to clear the air?

20 CHAIRPERSON SAWYER: Would you please conclude

21 your remarks?

22 MR. BISHOP: I encourage the ARB to work to

23 eliminate the conflict of interest the Regional

24 Transportation Authority mentioned in the Economy and

25 Technology Advancement Advisory Committee. The

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 1 outsourcing of government-based ride share matching

 2 services should be a near-term solution for AB 32.

 3 CHAIRPERSON SAWYER: Thank you.

 4 Doug Korthof.

 5 MR. KORTHOF: I am Doug Korthof. I came here

 6 again all the way from Seal Beach. Today, there is no one

 7 with me. But I'm hoping next month that many more people

 8 will be coming.

 9 This study validates prior studies and common

10 sense. The closer you live to freeways -- if we can have

11 slide five, it's 500 meters, not 500 feet. 500 meters.

12 That the minimum distance in the study is. The greater

13 the permanent lung damage to children. Adults are not

14 immune. There is damage even to grown-up lungs and to

15 those driving on the freeway in cars and those living near

16 residential streets.

17 The problem is not the freeways. The problem is
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18 the internal combustion cars, mobile source emissions

19 supposedly regulated by the Air Resources Board and the

20 stationary source refinery emission supposedly regulated

21 by the Air Quality Management District. Both agencies are

22 still compiling reports.

23 ARB abandoned and crushed electric cars in 2003.

24 AQMD allows emissions trading. Refineries buying the

25 right to damage the lungs of Wilmington kids by reducing

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 1 gross polluters elsewhere.

 2 One article stated these new results show that

 3 living near the freeway was unacceptable when affect urban

 4 design. That's bogus. We live with our cars. You can't

 5 move away from your own garage.

 6 What it really indicates is that the integration

 7 of internal combustion vehicles in a great urban

 8 population has unacceptable consequences. The only way to

 9 clear up this problem is either get rid of the cars or

10 else have zero emission vehicles as all of your cars and

11 all the ones in the city, or as many as possible.

12 Zero emission vehicles don't need refineries.

13 Both these facts -- you know, the relation of cars and

14 auto pollution to refineries is obscured by the fact

15 different agencies handle the issue. If you decrease

16 petroleum use, you decrease refinery emissions. Millions
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17 of people think it's not their car's exhaust that's

18 necessary and inconsequential. It's all the other folks

19 that are the problem. They can drive their SUV, and

20 everybody else should cut down.

21 Behind the numbers is a great potential anger.

22 In the burning theater, each person knows everybody else

23 should calmly walk to the exit but thinks it won't do any

24 harm for just him to run. We want to be exceptions.

25 The more kids are outside, the greater the degree

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 1 of permanent lung damage. Not just potential world-class

 2 athletes that never develop. Lesser lungs are shriveled.

 3 Asthmatics struggle to breathe or are rushed to the

 4 emergency room and not paid for by the refineries that

 5 cause the damage in the first place.

 6 This is not a necessary evil. There is a

 7 solution, and one that can -- that an agency, ARB, is in

 8 fact charged with enforcing -- developing and enforcing.

 9 This suffering can with strategies remain unnecessary as

10 well as unacceptable. Zero emission vehicles such as the

11 Toyota RAV 4 electric vehicle using nickle metal hydroid

12 batteries are capable of up to 100 miles -- up to 80 miles

13 an hour for ordinary driving without firing up a new

14 gasoline genset, which would take it for occasional longer

15 trips. We need these cars. Nickel metal hydroid powered
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16 zero emission vehicles --

17 CHAIRPERSON SAWYER: I must ask you to conclude,

18 please.

19 MR. KORTHOS: I am concluding. Powered by and

20 helping to finance ubiquitous solar rooftop solar systems.

21 Government can enable this solution by enabling cars --

22 zero emission cars on the free market. Without these cars

23 on the free market, there is no solution. Anything you do

24 is merely counting and studying and allowing. With these

25 cars and with solar systems, you can create a solution.

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 1 If you don't do it, you're abandoning your duty in my

 2 view. I think you need to return to the zero emission

 3 vehicle mandate and enforce it.

 4 CHAIRPERSON SAWYER: Thank you.

 5 Agenda Item 7-3-2, Report from the Air Resources

 6 Board Staff on the Status of California's 2007 State

 7 Implementation Plans, or SIPs. These SIPs must

 8 demonstrate attainment of federal air quality standards

 9 for ozone and for fine particulate matter. This staff

10 report provides a preview of the SIPs the Board will

11 consider for approval at public hearings in the next few

12 months.

13 The presentation focuses on the two regions with

14 the worst air quality: The South Coast Air Basin and the
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15 San Joaquin Valley. The report will highlight the need

16 for further reductions of mobile source emissions and the

17 Air Resources Board staff's proposed SIP strategies.

18 Ms. Witherspoon, please begin the staff

19 presentation.

20 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr.

21 Sawyer.

22 The State Implementation Plan is a vitally

23 important document that lays out the pathway to achieve

24 national ambient air quality standards. The SIP also

25 provides a legally enforceable mechanism to ensure that

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 1 each state is on track to meet its respective deadline or

 2 deadlines for attainment.

 3 California is the only state in the nation with

 4 extreme non-attainment areas for ozone and the only state

 5 in the nation with serious non-attainment areas for fine

 6 particulate matter, or PM2.5. SIP requirements are

 7 derived from federal law and the U.S. Environmental

 8 Protection Agency interprets how these requirements apply

 9 to the state. Federal guidance on SIPs is constantly

10 evolving as national air quality standards change and as

11 legal disputes are resolved in court.

12 Lynn Terry will talk in a moment about how

13 upcoming federal guidance provisions may affect
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14 California.

15 All states are dependant on national rulemakings

16 to provide some of the emission reductions needed for

17 attainment. California has particularly large needs since

18 federal emission sources in our state comprise a

19 substantial and growing percentage of the emission

20 inventory for oxides of nitrogen, oxides of sulfur, and

21 directly emitted particulate. Unfortunately, the U.S.

22 EPA's regulatory decisions are typically framed from a

23 national perspective and do not reflect California's

24 needs. What that means in plain English is that U.S. EPA

25 is not requiring advanced after-treatment technology for

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 1 diesel engines in time to meet California's attainment

 2 deadlines, particularly the looming 2015 deadline for

 3 PM2.5 for which there is no relief under the current Clean

 4 Air Act.

 5 Legacy diesel fleets are the key issue facing

 6 California as we prepare our attainment plans for ozone

 7 and for PM2.5. While California has unique authority to

 8 regulate mobile sources, there are significant federal

 9 preemptions and practical limitation. Also, international

10 sources of air pollution, primarily oceangoing ships, are

11 an increasing problem that even national action cannot

12 fully address.
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13 At your July Board hearing, we will present

14 staff's proposed statewide emission reduction strategy for

15 mobile sources, fuels, and consumer products under ARB

16 jurisdiction. This is ARB's portion of the State

17 Implementation Plan which is then incorporated by each of

18 the local air districts. Between now and then, three

19 public workshops will be held in Sacramento, Fresno, and

20 southern California on our statewide strategies.

21 Also, in June, you will be asked to act upon

22 proposed SIPs for the South Coast and the San Joaquin

23 Valley. While every SIP cycle is difficult, these plans

24 are perhaps the most complex and far-reaching SIPs this

25 Board has have faced in its 30-year history. The San

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 1 Joaquin Valley SIP will be before you at a special hearing

 2 in Fresno on June 14th. And the South Coast SIP will be

 3 heard on the second day of our regular June hearing on the

 4 21st.

 5 Several other local air districts must submit SIP

 6 updates as well this year, but those plans are relatively

 7 straight forward and in some cases essentially

 8 administerial. We will be processing those plans in

 9 bundles as the year proceeds. For example, the San Diego

10 SIP will be heard at your May meeting in San Diego.

11 Before we begin staff's slide presentation, I
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12 will ask Ms. Terry to briefly report on two letters

13 regarding the PM2.5 attainment deadline that made

14 headlines in this week's press. Lynn.

15 DEPUTY EXECUTIVE OFFICER TERRY: In 2005, U.S.

16 EPA designated areas out of compliance with the annual 2.5

17 standard and proposed a rule that would establish

18 attainment deadlines and other SIP requirements. That

19 guidelines is about to be finalized as a federal

20 regulation.

21 EPA's 2005 proposal was to apply a deadline no

22 later than 2015 nationwide. At that time of the EPA

23 staff's proposal, ARB staff's analysis of the emission

24 trends, the measured air quality data, and ARB's

25 aggressive rulemaking schedule suggested we could project

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 1 attainment for both the San Joaquin Valley and the South

 2 Coast Air Basin by that date. We did not comment on their

 3 initial rule in early January of '06 for that reason.

 4 This positive view of the situation for the San

 5 Joaquin Valley continues to be the case. Even though we

 6 haven't completed the air quality modeling, the prospects

 7 for attainment by 2015 look very good for the San Joaquin

 8 Valley.

 9 However, as you will hear shortly, now that we

10 have air quality modeling for the South Coast Air Basin,
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11 the future projections are not as positive for that

12 region. As a result, I drafted a letter for Ms.

13 Witherspoon's signature that was intended to alert EPA

14 staff to the unique situation faced in the South Coast Air

15 Basin. The March 12th letter made the point of the

16 severity of the problem in the South Coast is unique in

17 the nation. The purpose was to make EPA aware of the

18 scope and the nature of South Coast's problem so the

19 option of additional time would not be foreclosed by their

20 rule.

21 This was not a formal request for an extended

22 deadline. Such requests are only made as part of the

23 formal SIP process and ultimately must be approved by this

24 Board. Since this was not clear in the March 12th letter,

25 we clarified this point in a follow-up letter on March

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 1 20th.

 2 Now, Kurt Karperos, Chief of our Planning Branch,

 3 will walk you through where we stand on SIP development

 4 and the process in more detail. Kurt.

 5 (Thereupon an overhead presentation was

 6 presented as follows.)

 7 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

 8 CHIEF KARPEROS: Good morning, Chairman Sawyer, members of

 9 the Board.
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10 The issue of legacy diesel fleets is key to both

11 ozone and PM2.5 SIPs, but the PM2.5 deadlines comes first,

12 so I'll focus today's briefing primarily on that problem.

13 But before I start, also seated with me at the

14 staff table today are Silvia Oey, Karen Magliano, and John

15 DaMassa. Ms. Oey is responsible within the Planning

16 Branch for coordinating with the South Coast Air District

17 on the development of their plan. Karen Magliano is Chief

18 at the Air Quality Data Branch. And John DeMassa is Chief

19 of the Modeling and Meteorology Branch.

20 This round of SIPs is the first for PM2.5. It's

21 a complex pollutant made up of many different types of

22 particles, some emitted directly, others formed in the

23 air. This is the first really extensive use of particle

24 air quality air modeling for SIPs. Because PM modeling is

25 relatively new, at least compared to ozone, there has been

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 1 less opportunity to corroborate model results over time.

 2 Specifically, there are questions about how modeling

 3 compares to measured trends in the air and what we can

 4 conclude about what it will take to meet the federal PM2.5

 5 standard. Ms. Magliano and Mr. DeMassa's staff's

 6 expertise has been critical to trying to answer these

 7 questions and others during SIP development.

 8 SIPs are plans. They're not regulations. Like
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 9 any plan, they're living documents that need to be updated

10 periodically as we learn more. However, at the same time,

11 SIPs have to meet special federal criteria. And,

12 ultimately, after they're approved by U.S. EPA, or

13 content, any SIP commitment California makes becomes

14 enforceable on the State in federal court. So what you

15 decide to put in the SIP and how the SIP deals with

16 technical uncertainty is critical.

17 --o0o--

18 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

19 CHIEF KARPEROS: Now where do we stand today in terms of

20 SIP development?

21 First for the San Joaquin Valley, there's been

22 some confusion recently about whether it can meet the

23 standard by the 2015 deadline. Staff believes it will.

24 The region is about 25 percent above the standard, and

25 measured air quality trends are positive. Based on

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 1 staff's technical work to date, we anticipate the emission

 2 reduction measures that staff is developing for your

 3 consideration combined with local measures will bring the

 4 region into attainment by 2015.

 5 Air district and ARB staff will complete the

 6 valley's technical PM2.5 work once the valley's ozone SIP

 7 is done. And we expect to be able to propose to you
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 8 approval of the San Joaquin Valley PM2.5 SIP early next

 9 year for submittal to U.S. EPA by April 2008, the deadline

10 for PM2.5 SIPs.

11 The South Coast PM2.5 picture is less positive.

12 Measured PM2.5 levels are about 50 percent above the

13 standard. And while the measure trend is steadily down,

14 detailed modeling done by the South Coast District shows

15 that we need to reduce NOx emissions by about 50 percent

16 from today's levels to meet the standard. Staff's current

17 draft proposals provides most but not all of the needed

18 reductions, leaving an emission reduction gap. We have

19 not been able to identify feasible measures to close that

20 gap. Therefore, as it stands today, ARB staff believes

21 the South Coast PM2.5 plan is not currently approvable.

22 The draft ozone plans for the two regions are

23 controversial, but staff believes they meet federal

24 requirements. Both districts have identified in their

25 plans their intent to seek ozone attainment deadline

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 1 extensions out to 2023, the maximum time allowed by U.S.

 2 EPA. This raises obvious public concern about clean air

 3 delay. But given the magnitude of the ozone challenge in

 4 the two areas, they will need new technologies for both

 5 mobile and industrial sources to get all the emission

 6 reductions needed for attainment. Their extension request
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 7 will give them the time they need to reach full ozone

 8 attainment.

 9 Most communities will attain the ozone standard

10 well before the proposed 2023 deadline. When the Board

11 considers approval of two ozone SIPs, will you hear more

12 detail about the legal tests that apply to the selection

13 of final attainment dates as well as the progress that

14 will occur in terms of emission reductions.

15 --o0o--

16 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

17 CHIEF KARPEROS: To attain the federal PM2.5 standard in

18 the South Coast, we must clean up the legacy diesel fleet.

19 Cleaner standards for new engines are mostly in place or

20 they're coming. But to meet the mandated PM2.5 deadline,

21 we must clean the engines that are in use today.

22 The good news is that we have to do the same

23 thing for ozone. So the State's strategies for the two

24 pollutants can work together. But the scale of the need

25 is massive. By the time California meets both the PM2.5

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 1 and the ozone standards, we will have cleaned up

 2 essentially every diesel engine. The PM2.5 deadline is

 3 2015, some nine years before the final ozone deadline.

 4 This makes the phase in of the cleanest U.S. EPA engine

 5 standards the critical hurdle to achieving the needed
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 6 emission reductions on time.

 7 As you can see from the dates on this slide, the

 8 federal implementation dates don't help. There's barely a

 9 year or two for California to get the cleanest

10 construction equipment into use. And the standards for

11 the most critical engine sizes phase in last. We have

12 about three to four years to get the cleanest trucks into

13 the fleets. And worse, the cleanest locomotive and marine

14 engines come in only after the 2015 attainment deadline.

15 And for ships, there's nothing yet on the horizon.

16 --o0o--

17 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

18 CHIEF KARPEROS: This slide gives scale to the problem.

19 This represents NOx emissions in the South Coast in 2006.

20 The total is 972 tons per day. Starting with trucks at

21 the top of the maroon wedge at about 2 o'clock all the way

22 around to the last maroon slice, ships at 11 o'clock are

23 the categories listed on the last slide for which we are

24 reliant on federal or international new engine standards.

25 Although the very cleanest NOx standards that we will need

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 1 aren't yet implemented, there are already interim

 2 standards in place for trucks, construction equipment, and

 3 locomotives, so these sources will go down, some a lot by

 4 2014.
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 5 --o0o--

 6 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

 7 CHIEF KARPEROS: That's what you see on this slide.

 8 Between now and 2014, trucks we project to drop by 130

 9 tons per day; cars, minivans, and SUVs by 11 tons per day;

10 construction equipment by 45 -- skipping over ships for a

11 moment -- locomotives by 17 tons per day; and combined

12 local sources for NOx also by 17 tons per day.

13 Ships, as you see, are clearly another matter.

14 This is what happens when you combine a rapidly growing

15 sector of the economy with lack of control. Coordinated

16 action by California, the federal government, and

17 international agencies is critical to solving this

18 problem.

19 --o0o--

20 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

21 CHIEF KARPEROS: California has dual goals for legacy

22 fleet cleanup. Since the Board adopted the Diesel Risk

23 Reduction Plan in 2000, ARB has been focusing on near-term

24 actions to reduce public exposure to diesel PM. So far,

25 our staff has proposed and the Board has adopted diesel

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 1 particulate reduction fleet rules for certain fleet types,

 2 for example, trash trucks and the municipal fleets.

 3 Now the two biggest diesel fleet rules are coming
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 4 up. The construction fleet rules is scheduled for your

 5 May hearing followed by the private truck fleet rule.

 6 Now via the SIP, we're overlaying the need for

 7 accelerated NOx reductions for PM2.5 and ozone attainment

 8 onto our existing diesel particulate reduction goal.

 9 Staff's rule development is changing to accommodate the

10 overlay, and the result is even more ambitious rule

11 proposals.

12 --o0o--

13 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

14 CHIEF KARPEROS: In rule development now, staff is

15 balancing a combination of retrofit technologies to reduce

16 PM and engine or equipment replacement to reduce NOx.

17 Where they're available, PM retrofit technologies offer

18 the cost effective means for near-term diesel particulate

19 reductions. High efficiency NOx retrofit systems are not

20 yet available today on any scale that would provide the

21 amount of NOx emission reductions needed for PM2.5

22 attainment in either the South Coast or San Joaquin

23 Valley. So staff's proposed approach for the SIP is to

24 pursue early particulate matter retrofits and accelerate

25 introduction of NOx technologies as it becomes available.

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 1 The availability of NOx technology is largely governed by

 2 the federal implementation schedule we looked at earlier.
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 3 --o0o--

 4 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

 5 CHIEF KARPEROS: Starting last year, staff have been

 6 developing a proposal for new regulatory actions for

 7 inclusion in the SIP. We released a summary of the

 8 preliminary concepts last September and held two workshops

 9 on the concepts, one in October, another in November.

10 Staff have also participated in local air

11 district workshops to present the concepts and hear

12 comment.

13 We released a draft proposal in January. This

14 slide summarizes the primary NOx measures in that draft.

15 The construction fleet proposal follows the rule

16 currently under development. The general concept is a

17 declining fleet average emission rate that fleet owners

18 must comply with. Fleets that exceed the average would

19 need to retrofit or replace their equipment. Staff's rule

20 concept has a limit on the maximum amount of turnover a

21 fleet owner would have to do per year.

22 Rulemaking for private truck fleets is not as far

23 along as it is for the construction equipment fleets. But

24 the basic concept would be similar to the construction

25 fleet approach. The passenger vehicle reductions are from

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 1 proposed improvements to smog check and increased car
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 2 scrappage.

 3 Rulemaking for ships and harbor craft is

 4 underway. The concepts are cleaner fuels, cleaner

 5 engines, and electrification. Locomotives remain on the

 6 list, although U.S. EPA's recent proposal for a 2017 NOx

 7 standard complicates matters. We've been saying U.S. EPA

 8 needs to set the NOx standard for 2012. That would

 9 facilitate California working with the railroads to

10 maximize the use of the cleanest locomotive in the state

11 as soon as possible.

12 These proposals total to 125 tons per day of new

13 emission reductions beyond the reductions from already

14 adopted measures.

15 --o0o--

16 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

17 CHIEF KARPEROS: However, as I said at the outset, this

18 falls short of the reduction South Coast modeling says are

19 needed. This table summarizes the emission reduction gap.

20 The first line is the emission reductions needed

21 as established by the South Coast Districts through its

22 modeling.

23 The second line is the estimated emission

24 reductions available from a combination of ARB and South

25 Coast measures. For example, the 132 tons per day of NOx

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 1 reductions in 2014 is equal to 125 tons from ARB staff

 2 proposed measures plus seven tons per day from the South

 3 Coast measures.

 4 The last line is the gap between the proposed

 5 measures and the needed reduction. The gap for ROG, SOX,

 6 and diesel PM are relatively small. ARB staff believes

 7 these gaps are resolved.

 8 The NOx emission gaps is large; 71 tons per day.

 9 As I said before, staff have not been able to identify

10 feasible and therefore SIP approvable measures that can

11 bridge the gap. I'll speak to SIP approved a little bit

12 later in the briefing.

13 Before that, in the next three slides, we'll try

14 to give you some context for you to judge the size of the

15 gap.

16 --o0o--

17 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

18 CHIEF KARPEROS: This first chart shows the gap in

19 relation to the NOx emission trend. The curve dropping

20 from the top left corner to the bottom right shows the

21 projected decline in NOx emissions from all existing

22 reduction programs, plus the estimated benefit of new ARB

23 staff proposed measures, plus the reductions from new

24 South Coast local rules.

25 The horizontal lines, the South Coast modeled

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 41

 1 target level for allowable NOx emissions at attainment,

 2 the so-called NOx carrying capacity.

 3 The vertical line above the year 2014 is the 71

 4 tons per day gap you saw on the table in the previous

 5 slide. The sharp decline in emissions curve reflects the

 6 effectiveness of the State's existing control program plus

 7 the accelerated NOx reductions from ARB staff's proposals.

 8 The chart does project the combination of existing

 9 controls, and ARB staff proposed new measures would bring

10 NOx emissions down to the target level, albeit in 2017.

11 --o0o--

12 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

13 CHIEF KARPEROS: This chart shows the declining trend in

14 measured PM2.5 levels. The points on the line are design

15 values which are an average of high values over three

16 years, so the 2001 value represents 1999, 2000, and 2001

17 one air quality and so on.

18 Rubidoux is in Riverside County. It had the

19 highest measured PM2.5 levels in the South Coast.

20 The federal annual average standard at 50

21 micrograms per cubic meter is there for comparison. The

22 trend is very positive, approaching a 30 percent drop

23 between 2001 and 2006. It is this trend that gave ARB

24 staff early optimism that an approvable SIP could beat the

25 standard was very doable.
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 1 In the fall of last year, South Coast modeling

 2 first indicated a different situation. Contrary to what

 3 ARB staff expected based on measured data, the South Coast

 4 district modeling said that much greater reductions,

 5 especially NOx reductions, would be needed. While staff

 6 continues to believe that measured data show a much

 7 greater response to reductions than does the model, U.S.

 8 EPA requires the use of models in SIPs. Therefore, staff

 9 proposed to use the South Coast District's modeled

10 attainment targets.

11 --o0o--

12 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

13 CHIEF KARPEROS: Finally, this slide shows a combination

14 of measured and modeled data. The first two columns are

15 the Rubidoux design values, the same data for 2001 and

16 2006 from the last slide. The last column shows the

17 results of South Coast model.

18 There are a couple of things to bring to your

19 attention in this chart. The first is the change between

20 2001 and 2006 measured data and how that change compares

21 to the change between the measured 2006 data and modeled

22 projected 2014 data. In the five years between 2001 and

23 2006, we saw about a ten microgram per cubic meter drop in

24 PM2.5 levels in Rubidoux.

25 In contrast, the model suggests in the nine years
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 1 between 2006 and 2014, PM levels will drop by only about

 2 five micrograms per cubic meter. This illustrates the

 3 lack of response to NOx reductions of the model compared

 4 to what we would expect from major trends.

 5 The second thing to bring to your attention is

 6 the relative size of the modeled emission reduction gap

 7 compared to the modeled air quality gap. The model PM2.5

 8 concentrations represented by the last column is 15.7

 9 micrograms per cubic meter. The standard is 15. So the

10 0.7 microgram per cubic meter difference requires

11 according to the model 71 tons per day of NOx reductions

12 to close. Again, this is an indication of how

13 unresponsive to emission reductions the model is.

14 --o0o--

15 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

16 CHIEF KARPEROS: Before wrapping up, some points about the

17 legal framework for SIPs. They are plans. And therefore,

18 they need to be dynamic, but they're subject to specific

19 rules. They must be enforceable. U.S. EPA cannot approve

20 them if they are not. California must be able to

21 implement the measures in the SIP. So the State has to

22 have a legal authority to adopt the measures in the plan

23 or in some way compel the action it says will occur.

24 If the SIP relies on monetary incentives, the SIP
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25 has to show that the money is available. And expectation

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 1 of future money is not approvable. U.S. EPA sets these

 2 and other approval criteria through a formal rulemaking

 3 process and court rulings also factor into constraining

 4 what U.S. EPA can approve.

 5 U.S. EPA also uses its rulemaking process to

 6 implement new standards by defining what is required in a

 7 SIP, when the SIP is due, and when an area must meet the

 8 standard. It was this type of action by U.S. EPA that

 9 Ms. Terry was speaking about earlier in terms of expected

10 release of the PM2.5 implementation rule.

11 Finally, under State law, the Board must evaluate

12 the ultimate approvability of a SIP before adopting it and

13 directing staff to submit it to U.S. EPA. For example,

14 you will be asked to determine that a SIP is feasible

15 based on input from staff and from public comment before

16 approving it. And you will be asked to determine that the

17 reductions from existing measures and commitments made by

18 you for State measures are sufficient to attain the

19 standard.

20 --o0o--

21 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

22 CHIEF KARPEROS: Staff will bring to you in June a

23 proposed state strategy for the upcoming SIPs. It will
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24 include proposed commitments for you to consider.

25 Commitments are needed, because reductions from already

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 1 adopted measures are not enough for the South Coast and

 2 San Joaquin Valley to meet the standards. Although not

 3 all areas will need to rely on new measures, other areas

 4 besides the South Coast and San Joaquin Valley will.

 5 Sacramento, for example, is one.

 6 Staff will propose two types of commitments for

 7 you to consider. The first will be a commitment for the

 8 total tonnage reductions needed from new state measures

 9 for attainment. The second will be a schedule of action

10 dated for future measures needed to fill the tonnage

11 commitment. Once approved by U.S. EPA, these commitments

12 are enforceable in federal court. So if California fails

13 to deliver on the tonnage commitment, the State can be

14 directed to act by a court.

15 --o0o--

16 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

17 CHIEF KARPEROS: We have scheduled public workshops in

18 April for staff's proposed State strategy. Our primary

19 focus of these workshops will be resolution of the PM2.5

20 emission reduction gap. Some critical topics are:

21 What is the significance of the uncertainty in

22 the PM2.5 modeling?
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23 Can the difference between the air quality

24 modeling and modeling data be reconciled?

25 Are there additional feasible measures that can

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 1 close the gap?

 2 Can we buy enough tons to close the gap?

 3 Are there future technologies that we can use,

 4 and can we construct an approvable measure based on those

 5 future technologies?

 6 --o0o--

 7 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

 8 CHIEF KARPEROS: Lastly, what is ARB staff's public

 9 process for going forward? As I said, we have public

10 workshops scheduled for April 5th in Sacramento, 10th in

11 Fresno, and 25th in southern California.

12 We released a draft State strategy in January.

13 We'll release a final proposed draft 45 days prior to the

14 ARB hearing on the strategy. We're targeting a late April

15 release at this time.

16 As part of ARB's oversight rule for the SIP,

17 staff will evaluate the local plans and recommend to you

18 appropriate action. Staff will release for public review

19 staff reports containing its evaluation of the local plans

20 and recommended action once the local air districts adopt

21 their plans.
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22 Finally, we'll bring to you for your

23 consideration the proposed State strategy and the local

24 plans. Two meetings are currently scheduled, June 14th in

25 Fresno for the San Joaquin Valley Plan, and a week later,

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 1 June 21, in southern California for the South Coast plan.

 2 That concludes my presentation.

 3 CHAIRPERSON SAWYER: Thank you, Mr. Karperos, for

 4 a very clear presentation of a complex problem.

 5 Are there questions from the Board members?

 6 Ms. D'Adamo.

 7 BOARD MEMBER D'ADAMO: I agree. That was very

 8 helpful.

 9 I'm looking at slide number nine, tons per day

10 and the shortfall, and wondering how that integrates with

11 slide number 10 on the NOx emission trend. What I've done

12 here is at the bottom of slide 10 from where that black

13 line intersects with the yellow line, I guess I'm just a

14 little confused by the PM2.5 attainment target in the

15 light of the fact that this slide has to do with NOx and

16 wondering where that line intersects. That just gets us

17 to attainment on PM2.5, but where would be a similar

18 intersection for NOx?

19 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH

20 CHIEF KARPEROS: The horizontal yellow line represents the
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21 level of NOx emissions that the atmosphere can consume and

22 meet the PM2.5 standard. It's 443 tons per day of NOx.

23 EXECUTIVE OFFICER WITHERSPOON: Ms. D'Adamo, NOx

24 is a primary precursor to formation of particulate in the

25 atmosphere. That is why the attainment strategy is

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 1 heavily focused on NOx. There are direct particulate

 2 reductions, but the lion's share is from NOx itself which

 3 turns into nitrate in the atmosphere. So if this says

 4 PM2.5 attainment target, it should say in parens, NOx

 5 level, as Kurt just described.

 6 BOARD MEMBER D'ADAMO: So we get where we need to

 7 be at around 2017?

 8 EXECUTIVE OFFICER WITHERSPOON: That's right.

 9 BOARD MEMBER D'ADAMO: What about for ozone?

10 EXECUTIVE OFFICER WITHERSPOON: Ozone is not on

11 this slide. The attainment date would be about 2023, and

12 we believe we will get there.

13 BOARD MEMBER D'ADAMO: Okay. So that gap there

14 is a NOx emissions gap is what we're talking about on the

15 previous slide on shortfall?

16 EXECUTIVE OFFICER WITHERSPOON: That's right.

17 Just PM2.5 and just in the South Coast.

18 BOARD MEMBER D'ADAMO: And then that last list of

19 questions for the upcoming workshops, that's how we would
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20 get to the shortfall. Either we somehow magically come up

21 with dollars that are available so we can count the

22 dollars, or we somehow come up with technology for

23 additional retrofit, somehow squeezing more out of the

24 list that you already have.

25 EXECUTIVE OFFICER WITHERSPOON: That's correct.

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 1 If I can put this in plainer terms, we think to

 2 get there by 2014 there's three major drivers in the SIP,

 3 and it's the construction equipment, trucks, and

 4 locomotives.

 5 And with the construction equipment, everything

 6 has to have NOx after-treatment on it, whether that's a

 7 new piece of equipment from the assembly line or NOx

 8 retrofit virtually 100 percent conversion in 2014, because

 9 EPA says you have to have a full clean year before the

10 attainment deadline of 2015 because it's an annual average

11 standard.

12 For trucks, they all have to be 2010 models or

13 cleaner. In 2014, all the trucks essentially in the South

14 Coast air basin and the locomotives hauling out to Barstow

15 and running north/south route likewise have to be equipped

16 with NOx after-treatment where we have to electrify those

17 rail lines.

18 BOARD MEMBER D'ADAMO: Okay. And then going
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19 backwards there to slide eight, Kurt, you had mentioned

20 some of these categories were problematic. I think you

21 said something about EPA, recent decision on EPA. So that

22 was 4.3. Is it still 4.3 in light of what they've

23 proposed?

24 EXECUTIVE OFFICER WITHERSPOON: No. That 4.3

25 represented the completion of the turnover to Tier II

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 1 engines, plus the introduction of Tier III introductions

 2 by what we hoped was going to be 2012. We now have

 3 changed our own technical assessment and think it's

 4 probably not feasible until 2015. So I don't know which

 5 portion of that is Tier II versus Tier III.

 6 Mr. Scheible, do you?

 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: EPA created a

 8 new Tier IV. And they proposed 2017 for the NOx control.

 9 We think that can be accelerated at least a couple of

10 years. But given the time that's gone on, we don't think

11 it can be done by 2012. So we're going to be commenting

12 on that back to U.S. EPA in terms of the earliest date we

13 think the locomotive manufacturers could meet that with

14 new locomotives.

15 BOARD MEMBER D'ADAMO: Are we accounting for

16 those in the overall shortfall of 71? Already, we're

17 accounting for some of those challenges?
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18 EXECUTIVE OFFICER WITHERSPOON: We're 11 tons

19 short on locomotives, 15 tons short on construction, and

20 most of the rest short on trucks.

21 BOARD MEMBER D'ADAMO: Okay. The only other

22 thing I would maybe ask of staff -- and I think you're

23 doing a terrific job on this outlining the issues. But as

24 we move forward with these rules, you know, I've always

25 noticed we do have a tendency as we should to listen to

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 1 the stakeholders that raise concerns about how long it's

 2 going to take. And I think we should just have it

 3 underscored every step of the way that this document shows

 4 we need to move forward by May, for example. And the

 5 phase-in period needs to be the date that you've outlined

 6 in this document. If we don't meet that, it's going to be

 7 even worse. We're going to have to come up with

 8 additional tons from another sector so we can't keep

 9 putting it off. At some point, it's just not going to add

10 up.

11 EXECUTIVE OFFICER WITHERSPOON: You'll definitely

12 hear that from staff on the May meeting on the

13 construction rule. But we also need to tell you that the

14 rule as it stands is feasible for the industry. And so I

15 think what you'll hear from us is we have a proposal that

16 we believe is feasible. But it is still shy of the
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17 necessary NOx tons, and you might need to augment it later

18 to help close this gap. But we're recommending that we

19 receive because the PM reductions are crucial for health

20 protection. And we have to get started on the NOx control

21 or we'll get further and further behind.

22 BOARD MEMBER D'ADAMO: In other words,

23 calendaring it for additional reductions as technology

24 advances?

25 EXECUTIVE OFFICER WITHERSPOON: We're going to

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 1 bring you a proposal in May, and we would recommend that

 2 you act on it even if we don't have the full answer for

 3 NOx at this time. We might need to find substantial

 4 subsidies to do better than what we've proposed.

 5 BOARD MEMBER D'ADAMO: Thank you.

 6 CHAIRPERSON SAWYER: Professor Sperling.

 7 BOARD MEMBER SPERLING: Thank you. I'd like to

 8 focus on the ports issue and how it's related to this. If

 9 we go to slide eight, and there was an item there, 43 tons

10 per day reduction from ships and harbor craft.

11 And I note that earlier the comment was made that

12 there's no rules for ships and that the expected changes

13 from slide five were a large increase in NOx from ships.

14 So as background, that 43 looks like a big number. And

15 I'm wondering how this -- I've been reading and hearing a
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16 lot about what's going on in terms of reduction of NOx and

17 PM at the ports. And I'm wondering to what extent this

18 is -- how this connects up with some of those plans and

19 proposals that have been made to reduce the emissions at

20 the ports. And the mention was made that the focus here

21 is electrification, clean fuels in vehicles.

22 And so there's a couple issues here. One is what

23 is the strategy underlying this in terms of technology

24 versus other kinds of fees and incentives and market

25 incentives and the jurisdictional issues that are at stake

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 1 here. I mean, there's a couple of questions involved in

 2 that, but I'm just trying to get an appreciation of, you

 3 know -- I know what's going on down there in terms of the

 4 very aggressive proposals and how this all connects up.

 5 EXECUTIVE OFFICER WITHERSPOON: Well, one quick

 6 comment. What EPA has not done is proposed standards for

 7 oceangoing vessels. They have proposed them for every

 8 class beneath that size category. And then Mr. Scheible

 9 will tell you what all is combined in that 43 tons, which

10 is many more things besides.

11 BOARD MEMBER SPERLING: That includes the

12 increases in the oceangoing ships and reductions in the

13 harbor craft so on?

14 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yeah. The 43
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15 tons per day is quite an ambitious undertaking. And our

16 Goods Movement Plan by the 2015 time frame, we put forth a

17 strategy that included very large reductions for the ships

18 at dock. And the heart of that is doing shore power for a

19 sizable percentage probably -- I can't remember the exact

20 number. I think it's 60 percent of the ships by 2015 or

21 the equivalent control just for the emission reductions.

22 That's something that we think working with the

23 ports we probably have the legal authority to do. And it

24 will take an investment of money, and it will take

25 cooperation from the shipping side.

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 1 We also in that time frame propose that we get

 2 additional emission reductions from the ship main engines

 3 through retrofits. We don't have legal authority straight

 4 forward to do that. So we'll have -- that is a very

 5 ambitious strategy. And then there's a lot of harbor

 6 craft upgrading going on. So it's hard to guarantee the

 7 43 tons with what we know today, what we think that's the

 8 approximate magnitude of the things that are

 9 technologically feasible are done expeditiously.

10 EXECUTIVE OFFICER WITHERSPOON: There are two

11 other pieces: Vessel speed reduction, which we'll bring

12 to you as a regulation to make mandatory instead of just

13 voluntary. Also there are fuel standards. You, the
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14 Board, adopted a requirement for auxiliary engines within

15 24 miles of the coast to switch over to cleaner

16 distillate. And we are going to bring you a regulation to

17 require cleaner fuel in the main engine also motoring into

18 the ports. We've been sued on the first rule, so we need

19 to sustain our authority as we go onto the next. But all

20 of those pieces are part of that 43 tons.

21 What's not there are brand-new clean oceangoing

22 vessels preferentially assigned to California. So that we

23 get both the owners of ships order the cleanest ships that

24 can be built, and they send them preferentially to our

25 shores.

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 1 CHAIRPERSON SAWYER: Supervisor Hill.

 2 SUPERVISOR HILL: Thank you, Mr. Chair.

 3 I guess over the last week with some of the

 4 communications and reading in the press, it was kind of a

 5 little shocking I guess to hear the dialogue going back

 6 and forth. And I'm just having an opportunity this

 7 morning to look at the letters that actually went to EPA

 8 and the second letter that went out two days ago. And an

 9 outstanding report, by the way. That was wonderful. It

10 really focused on the problem, and I think the issue that

11 really is at hand.

12 The struggle that I see in looking at the
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13 letter -- and I can see it wasn't meant the way. But

14 there are some comments. We need to pursue the option of

15 additional time and some other issues, while it is

16 necessary to make this request based on the current

17 attainment analysis, and we should pursue this option or

18 EPA should pursue this option. It almost gets the feeling

19 we're throwing up our hands and kind of -- I don't want to

20 say giving up, because I know we don't do that here. But

21 I would hope in listening to the stakeholders we do work

22 diligently and aggressively to try and develop whatever

23 strategies are necessary in here. And I think that's our

24 goal, and we are going to do that. But I just don't want

25 the impression to be out there that we're not doing that.

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 1 And I think that as we move forward this year we'll see

 2 that. Thank you, Mr. Chair.

 3 EXECUTIVE OFFICER WITHERSPOON: We regret that

 4 impression too, because we intend to turn over every rock

 5 before we ask for even a month delay.

 6 CHAIRPERSON SAWYER: I have the first three

 7 speakers who requested to address us are Barry

 8 Wallerstein, Elaine Chang, and Joseph Bishop.

 9 Dr. Wallerstein.

10 (Thereupon an overhead presentation was

11 presented as follows.)
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12 DR. WALLERSTEIN: Good morning, Dr. Sawyer and

13 members of the Board. And congratulations to Supervisor

14 Hill and Professor Sperling for your appointments to the

15 CARB Board.

16 --o0o--

17 DR. WALLERSTEIN: We came here today to talk to

18 you generally about the plan. Unfortunately, I have to

19 start by saying that we strongly disagree with various

20 elements of the staff's presentation. We are at a

21 crossroads. It is a critical junction. We can't be

22 throwing our hands up. We have to find a way to say yes

23 to attainment by the deadlines.

24 If I could have the next slide.

25 --o0o--

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 1 DR. WALLERSTEIN: And the Board members have been

 2 provided copies.

 3 This is data provided by your staff recognizing

 4 that the South Coast District has about 4 to 5 percent of

 5 the national population. We have 52 percent of the

 6 population weighted exposure above the federal PM 10

 7 standard. If we look at a similar statistic for

 8 California, we have 82 percent.

 9 --o0o--

10 DR. WALLERSTEIN: The next slide shows that -- if
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11 we go back to the previous slide. If we look at for

12 ozone, we see that the statistics run 24 percent of the

13 populational exposure of the federal ozone standard. If

14 we look at the federal ozone standard, California is 73

15 percent.

16 --o0o--

17 DR. WALLERSTEIN: The next slide shows health

18 data this Board has been shown repeatedly. This is just

19 for PM2.5. Now this data is old. Your staff has

20 indicated properly improvement PM2.5 air quality. So go

21 ahead and take those numbers, cut them by a third. The

22 number is staggering.

23 Our Board members feel we have a health crisis.

24 Every day in the newspaper we see about train accidents or

25 bus accidents or other tragedies where human life is lost.

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 1 But not of the magnitude that is being experienced in the

 2 South Coast year in and year out.

 3 The next slide shows if we look at the emission

 4 as your staff was reporting --

 5 --o0o--

 6 DR. WALLERSTEIN: -- that about 80 percent of the

 7 key building blocks of directly emitted particulate

 8 contributing to our PM2.5 problem comes from mobile

 9 sources. If we look at the ozone problem, we see that
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10 it's about 66 percent.

11 On the next slide --

12 --o0o--

13 DR. WALLERSTEIN: -- if we look at the

14 responsibility by agency, we see that at the local

15 district level we have about 20 to 23 percent of the

16 sources and the emissions within our jurisdiction

17 depending upon whether you're looking at PM2.5 or you're

18 looking at ozone.

19 --o0o--

20 DR. WALLERSTEIN: Our next slide provides a

21 comparison looking at ozone and the two key building

22 blocks between the San Joaquin Valley on the left and the

23 South Coast air basin on the right. You'll notice that

24 our emissions are about 50 percent higher than that in the

25 San Joaquin Valley. But if we look at what the local

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 1 districts can do, it's quite clear that the mobile sources

 2 and the consumer products under State and federal

 3 jurisdiction require aggressive controls.

 4 Dr. Elaine Chang is going to follow me now and

 5 talk about what's needed to achieve clean air. And she's

 6 also going to talk about why early NOx reductions are so

 7 critical.

 8 Let me just conclude with two things. I'm going
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 9 to have this shared with the Board, but I have to have

10 these back because I have to return them to our

11 laboratory. This is a 24-hour particulate sample from

12 West Long Beach at an elementary school. This is what one

13 of us would breathe in about a three-month period. Paper

14 goes in white, comes out like this. The darker the color,

15 the more the elemental carbon. And in our view, the

16 higher toxicity a sample.

17 This one is a little harder to see. But this is

18 a PM2.5 sample taken this year in downtown Los Angeles.

19 Again, the paper goes in white. It comes out this dark

20 gray color.

21 And I would like to also mention that there is a

22 new federal 24-hour standard for PM2.5 we're going to have

23 to develop a plan to achieve. And this sample is way

24 above that allowable standard.

25 With that, I'd like to have Dr. Chang address the

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 1 Board.

 2 CHAIRPERSON SAWYER: Thank you, Dr. Wallerstein.

 3 Dr. Chang.

 4 DR. CHANG: Good morning, Mr. Chairman and

 5 members of the Board. For the record, my name is Elaine

 6 Chang, Deputy Executive Officer with the South Coast Air

 7 Quality Management District.
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 8 Following Dr. Wallerstein's presentation, I would

 9 like to go to --

10 --o0o--

11 DR. CHANG: Based on the analysis the district

12 staff has performed today, we echo your staff's

13 presentation that we need significant amount of emission

14 reduction. Let's just focus on NOx for the moment. We

15 estimate that we need approximately 30 percent emission

16 reduction from 2014. Your staff indicated 50 percent from

17 2005. We need 76 percent by 2023 for the ozone attainment

18 the following year. When we talk about 17 more tons of

19 NOx reduction for attainment, it's not just for Rubidoux.

20 In fact, our modeling analysis that we have several

21 stations including Burbank, Los Angeles, and Fontana. So,

22 you know, up to seven stations that would have standard

23 above the federal limit varying degree.

24 --o0o--

25 DR. CHANG: The amount of the emission reductions

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 1 needed are based on what we expect the in-use mobile

 2 source emissions will behave. This slide selected here

 3 for you to highlight that if the history has told us that

 4 every time we revise the air quality management plan, we

 5 update the mobile source emissions. The in-use emissions

 6 are higher than we previously thought. We need to factor
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 7 this into our deliberation when we look at the in-use

 8 emissions, the one that you're going to deliberate today

 9 on the recall regulation.

10 --o0o--

11 DR. CHANG: We focus so much on the PM2.5. I

12 want to bring to your attention that our eight-hour ozone

13 attainment strategy is not much better, because we have 41

14 percent emission reductions for into the black box

15 category undefined measures.

16 Next.

17 --o0o--

18 DR. CHANG: San Joaquin Valley, again, the

19 similar situation, even worse. Even though they have less

20 tons they need to reduce, but they have more than 60

21 percent of reductions fall under the black box category.

22 Next.

23 --o0o--

24 DR. CHANG: If we were to delay the 70 tons

25 reduction for future years, we're making the ozone problem

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 1 worse. We need those reductions for ozone anyway. If we

 2 were to put off the 71 tons, then our black box share will

 3 increase from 41 percent to 56 percent. We're setting

 4 ourselves for failure with such a huge balloon payment

 5 between 2020 and 2023. We urge you to consider all
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 6 feasible measures just as a stationary source have to do

 7 for the mobile sources.

 8 And we're pleased to hear Supervisor Hill's

 9 comment that let's not give up this time. Let us engage

10 all stakeholders to explore the solutions. We're looking

11 forward to continuing working with your staff to achieve

12 this objective. Thank you.

13 CHAIRPERSON SAWYER: Thank you very much, Dr.

14 Chang.

15 I have a question. The South Coast has chosen to

16 put their NOx and PM plans together rather than submitting

17 them separately.

18 DR. CHANG: Yes.

19 CHAIRPERSON SAWYER: Would you indicate the

20 rational for doing that?

21 DR. CHANG: Because the PM2.5 earlier attainment

22 date, so pretty much the amount of emissions needed

23 specifically for NOx will take our ozone strategy. In the

24 early planning process, when we're not clear how much NOx

25 we need, we choose to have a combined VOC and NOx strategy

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 1 for ozone. But after we receive your final emissions, we

 2 re-analyze the data. We found out that the ozone will be

 3 much better to take the NOx heavy strategy. So what kind

 4 of attainment strategy you choose for ozone really
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 5 predicated upon what you choose for PM2.5. For that

 6 reason, we believe we need to have a comprehensive view

 7 control strategy for both pollutants.

 8 CHAIRPERSON SAWYER: Thank you.

 9 MR. WALLERSTEIN: Dr. Sawyer, if I can also add

10 to that.

11 If we have to attain the federal PM2.5 standard

12 in 2015 and we believe there are very serious issues about

13 the appropriateness of what was requested in the staff's

14 letter over the last week -- but if we have to achieve

15 that standard in 2015, there is no time for delay. We

16 can't wait until next April to approve a PM2.5 plan. We

17 need it not only now, we needed it several years ago.

18 CHAIRPERSON SAWYER: Ms. D'Adamo.

19 BOARD MEMBER D'ADAMO: From a very simplistic

20 view, that seems to make sense to combine the plans.

21 Could staff comment on that issue?

22 EXECUTIVE OFFICER WITHERSPOON: The issue for us

23 is not whether the plans are combined. It's whether the

24 plan are approvable. And we do not at this moment believe

25 that the PM2.5 plan is approvable because we don't have

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 1 feasible measures to close the gap. And so by combining

 2 them, the ozone plan will be late while we work on solving

 3 the PM2.5 problem.
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 4 BOARD MEMBER D'ADAMO: Okay. And then if we

 5 could go back to the slides, do you still have them? On

 6 the black box, I think it was maybe two slides before the

 7 last.

 8 --o0o--

 9 BOARD MEMBER D'ADAMO: Maybe go one forward. I

10 think it had San Joaquin Valley and South Coast. There we

11 go.

12 --o0o--

13 BOARD MEMBER D'ADAMO: On the last plan, I guess

14 San Joaquin didn't have a black box. But on the last

15 plan, what did South Coast look like? In other words, is

16 this black box getting worse?

17 DR. CHANG: The last plan is about the same

18 percentage, but the tonnages are more difficult because

19 the cars are getting cleaner. And so we're dealing with

20 the residual emissions. I think for exactly the same

21 reason, the last plan at your adoption hearing you moved

22 97 tons on the black box to short-term measures.

23 BOARD MEMBER D'ADAMO: Okay.

24 MR. WALLERSTEIN: I think that last point that

25 Dr. Chang is making frankly is part of the reason for the

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 1 letter to U.S. EPA. For those of you like Board Member

 2 Riordan who were present in 2003, at our district's
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 3 request and the requests from a broad cross section of

 4 stakeholders, the Board moved black box reductions into

 5 short-term commitments. And quite candidly, your agency

 6 is 120 tons per day behind on those commitments made in

 7 the last plan that we're seeking to get us to attainment

 8 of the one-hour ozone standard in 2010. With the staff

 9 proposal that is going to be before you, we won't achieve

10 that one-hour previous federal ozone standard until after

11 2020.

12 BOARD MEMBER D'ADAMO: Maybe staff has a comment

13 to make.

14 EXECUTIVE OFFICER WITHERSPOON: We think these

15 pie charts are extremely misleading. And it's because

16 what the district has done is taken only the new measures

17 in the SIP, the rules we're proposing to adopt and the

18 measures we're still trying to figure out, and split them

19 between real and black box. But in point of fact, the

20 attainment of the standards is based on every rule we've

21 adopted to date, all the turnover we expect, those rules

22 are still paying dividends. So 75 percent of what we need

23 to achieve the standards in these regions is already on

24 the books based on the good work of this Board and of the

25 U.S. EPA. So it's not the case that 63 percent of the

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 1 strategy is undefined. It's 63 percent of the new
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 2 measures, which is 25 percent of the overall.

 3 DEPUTY EXECUTIVE OFFICER TERRY: Catherine, I

 4 didn't get that to you right.

 5 If you use NOx as an example for the ozone

 6 modeling in South Coast, from today's emission levels, we

 7 need another 75 percent reduction in NOx emissions. With

 8 the combination of our existing adopted rules and our new

 9 proposals, we will get 55 percent. So now we're talking

10 about a 20 percent black box. In the San Joaquin,

11 actually it's even better. We need about 70 percent

12 reduction in NOx for ozone attainment and existing

13 measures in our proposal to get 60 percent. So we need

14 another ten percent.

15 EXECUTIVE OFFICER WITHERSPOON: And black box

16 does not mean we are waving our hands and giving up. Back

17 box means we might need a subsidy we don't have. We need

18 a technology that isn't on the market yet. We can't count

19 them under the legal criteria that EPA uses for accepting

20 or rejecting a SIP. So they're sort of put in that

21 parking category as we work on them. But it is not a, oh,

22 well, let's just forget it. We'll never get to

23 attainment.

24 BOARD MEMBER D'ADAMO: Thank you.

25 CHAIRPERSON SAWYER: Mr. Bishop. And then we

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 1 will have Bonnie Holmes-Gen, Bill Magavern, and Doug

 2 Korthof.

 3 MR. BISHOP: I'm Joseph Bishop, founder of

 4 Trafficbulldog.

 5 At Trafficbulldog, we advocate alleviating

 6 traffic congestion through ride share and carpooling.

 7 Roger Noble of the Los Angeles MTA has stated that at 1.3

 8 riders per vehicle there would be no traffic congestion.

 9 Just 1.3 riders per vehicle. The original EPA estimate

10 for carpooling was 1.5 riders per vehicle. In the last 15

11 years, carpooling has dropped from 1.2 to 1.09 under the

12 Los Angeles MTA.

13 So while we are looking at -- well, no traffic

14 congestion, what does this mean? Trucks aren't stuck with

15 stop-and-go traffic. Trucks aren't idling. Trucks aren't

16 belching fumes. So it goes a great way in reducing the

17 fumes, the exhaust, that exist. So while we are looking

18 for feasible measures to close the gap, where is the role

19 of carpooling?

20 There are new websites out there, new

21 technologies to assist in carpooling to have a free

22 market-based system for ride share. Where is the support

23 for that? I think it's unrealistic to expect that new

24 vehicles will be the answer in attainment. I live in the

25 South Coast Air Basin. I see an awful lot of old

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 1 vehicles, vehicles that are older than 20 years. So I

 2 just don't think it's realistic, the current plan of

 3 expecting new vehicles to solve the problem. We really

 4 need to look at carpooling to help the problem. Thank

 5 you.

 6 CHAIRPERSON SAWYER: Thank you very much.

 7 Bonnie Holmes-Gen.

 8 MS. HOLMES-GEN: Good morning, Chair Sawyer and

 9 members of the Board. Thank you for the opportunity to

10 speak.

11 On behalf of the American Lung Association, I

12 want to comment that we do appreciate very much the

13 efforts that the CARB Board and the staff are making to

14 move forward to reduce diesel emissions, emissions from

15 other sources to grapple with this difficult SIP problem.

16 And we are supportive of the work that's underway to

17 control emissions from off-road diesel sources, for

18 example. And we've been working hard to both work with

19 the staff to develop the strongest rules possible and to

20 demonstrate and rally strong public support for those

21 efforts both in the public and the Legislature.

22 But we are very concerned about the long time

23 frames that are being projected for both the ozone and the

24 particulate matter SIP attainment dates. We're concerned

25 about the delays that seem to be under consideration for
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 1 the PM SIP. And we are very concerned that we need to

 2 work much harder in a much more concerted effort with a

 3 goal to meet the deadlines and to rally all of our efforts

 4 and to adopt every rule possible to meet the required

 5 federal deadlines as they are in law.

 6 We are concerned that the public health impacts

 7 are just too great to delay clean air any further. The

 8 asthma attacks, the asthma epidemics, the lung illnesses,

 9 the abnormal lung growth in children, the premature

10 deaths, all the health impacts you hear every month in

11 your reports. Burdens are growing on our society. And

12 the epidemic needs to be addressed. And we need to have a

13 SIP plan that's actually going to achieve clean air.

14 How are we going to work together in this effort?

15 Well, for one thing, we think that California needs to

16 work harder to push the federal EPA to accelerate and

17 tighten proposed regulations, such as the locomotive and

18 marine engine regulations. We appreciate that comments

19 are being made, but we think there needs to be a concerted

20 lobbying effort by California to push for much quicker

21 action at the federal level to meet our attainment needs.

22 We also need to move forward quickly on important

23 rules such as the off-road equipment rule. But we need to

24 consider how we can strengthen those rules. If we are not

25 going to be able to adopt technology-forcing regulations,
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 1 then we need to commit -- the Board needs to commit to

 2 coming back on a very quick time frame to amend and

 3 strengthen those regulations to meet these SIP

 4 commitments.

 5 We believe the Board needs to outline the dollars

 6 and the strategies that are going to be needed to meet the

 7 deadlines, to meet the SIP deadlines without extensions.

 8 And the Governor, the Legislature, the public needs to

 9 understand what exactly would be needed in terms of

10 dollars, in terms of commitments by the business and the

11 public sectors, and what exactly will bring us to clean

12 air by those deadlines.

13 We believe the CARB Board should push for new

14 funding mechanisms --

15 CHAIRPERSON SAWYER: I must ask you to conclude,

16 please.

17 MS. HOLMES-GEN: -- such as the container fees at

18 the port to fund port and goods movement mitigation

19 strategies, including shore power. The Board needs to be

20 an advocate to raise new funds. We appreciate the bond

21 dollars and the funds that have been raised. But as we

22 know, there are many times more funding that is needed.

23 The bottom line is that the challenge of

24 attaining clean air is daunting, but the benefits are
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25 tremendous. We have to remember the public health

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 1 benefits far outweigh the costs of any regulation by

 2 billions of dollars. We have the data on the public

 3 health benefits. We know that the public health, the

 4 reductions in premature deaths, the reductions in lung

 5 illness, hospitalizations, school absences add up to

 6 billions of dollars and are extremely important to the

 7 public. And the public is asking you to please move

 8 forward quickly on the SIP.

 9 CHAIRPERSON SAWYER: Thank you.

10 Bill Magavern.

11 MR. MAGAVERN: Good morning, Mr. Chairman and

12 Board members. I'm Bill Magavern, representing Sierra

13 Club of California. And I think it will come as no

14 surprise to any of you that as an advocate for public

15 health and the environment, we do not find any delay in

16 achieving healthy air to be acceptable. But we do

17 understand the challenges that have been outlined this

18 morning particularly in regards to the legacy diesel

19 fleet.

20 So I'm here to make a suggestion. I spend most

21 of my time over in the Capitol. And what I see over there

22 is we have a Governor who ran in 2003 on a specific

23 proposal to reduce air pollution by 50 percent by 2010.
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24 We have a Legislature that has passed a number of clean

25 air measures. And the Governor and the Legislature have

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 1 certainly shown some ability to work together in a

 2 bipartisan or some say post-partisan fashion when it comes

 3 to protecting our air and our atmosphere.

 4 And finally, the people of California strongly

 5 support cleaning up our air. So let's not assume a lack

 6 of political will. And the politics may be different than

 7 they were even a few years ago. I think what this Board

 8 should do working with the air districts and with the

 9 support of Cal/EPA is to lay out for the Governor and the

10 Legislature and the public exactly what it would take to

11 come into attainment by the deadlines, what new laws would

12 it take, what regulations, what incentive programs, how

13 much money will we need in the budget, what do we need to

14 ask our representatives in Congress to do for us. And

15 then it's up to those elected officials to come through.

16 And the people will have a way to measure whether we're

17 actually getting the support that we need to clean up our

18 air. I think that that's something that it's incumbent on

19 this Board to do, and the people of California deserve

20 nothing less. Thank you.

21 CHAIRPERSON SAWYER: Thank you.

22 Mr. Korthof.
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23 MR. KORTHOF: Some of our people are following

24 this meeting on the web cast. One of them just wrote me.

25 These are the people that are paying for all this. One

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 1 just wrote me he would like to get a day off so he can

 2 come in and talk to you. Instead, he has to breathe the

 3 dirty air.

 4 Well, I think S-I-P, SIP, is a good name for

 5 this, because you've get a giant problem and all you're

 6 taking is tiny sips out of it. It's a picky, do-nothing

 7 plan that basically has no chance of success and just does

 8 the same thing that you did in 2003, pushes the problem

 9 back to the time when it's not your problem anymore.

10 Supposedly, you back-ended the ZEV requirements to 2018

11 back in 2003. This is sort of like the times when we come

12 up to the end of a program and we say, oh, let's push it

13 out to an emergency plan 20 years from now. Then 20 years

14 later nothing is done. We say, oh, another 50 years.

15 People of California can't wait 50 years.

16 The Sierra Club lobbies the Governor and lobbies

17 the Legislature. Where are you guys? The staff, if

18 they're so excellent as you just commented on the

19 excellent reports they're doing, they're doing their job.

20 Where is your job? Where are you standing up to industry?

21 Maybe instead of sipping at this problem and dancing
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22 around like a bunch of elves, maybe you should listen to

23 somebody besides industry representatives. Maybe you

24 should listen to the general public instead of General

25 Motors.

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 1 CHAIRPERSON SAWYER: Thank you.

 2 Does staff have any comments?

 3 EXECUTIVE OFFICER WITHERSPOON: Not at this time.

 4 We'll have many for you in the months ahead.

 5 CHAIRPERSON SAWYER: I will make a comment. I

 6 would like to compliment the staff. And you're certainly

 7 instructed to continue working with the South Coast Air

 8 Quality Management District staff.

 9 There will be meetings at higher levels with the

10 South Coast and Southern California Association of

11 Governments and our Board that will occur in a few weeks.

12 And we're going to continue to work on this problem. We

13 all share the desire and the responsibility for protecting

14 the health of the people of California. And I think I can

15 provide the commitment of this Board to continue to work

16 with the South Coast and with the San Joaquin Valley

17 Districts to develop an approvable SIP for both areas.

18 EXECUTIVE OFFICER WITHERSPOON: Dr. Sawyer, I do

19 want to say we completely agree with Bill Magavern's call

20 for the Air Resources Board to lay out what it would take,
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21 and staff is working on exactly those kinds of

22 calculations, those identifications for this Board and for

23 all other interested stakeholders.

24 CHAIRPERSON SAWYER: Thank you.

25 Since this is not a regulatory item, it is not

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 1 necessary to officially close this record. And we will

 2 now take a ten-minute break, resuming at ten minutes to

 3 11:00.

 4 (Thereupon a recess was taken)

 5 CHAIRPERSON SAWYER: Agenda Item 6-11-5, proposed

 6 Amendments to the Air Resources Board Warrantee

 7 Information Reporting and Recall Regulations.

 8 This item was initially presented to the Board in

 9 December 2006. At that time, the Board judged the

10 proposal to be promising but in need of some

11 modifications. Specifically, we asked staff to finalize

12 conceptual changes presented at the December meeting and

13 to work with the affected industry to resolve as many

14 outstanding issues as possible.

15 Some Board members present today were not at the

16 December 2006 hearing. However, I understand that those

17 members have received the materials pertinent to this

18 item, have had the chance to review them, and are prepared

19 to participate in today's proceeding. Am I correct?
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20 SUPERVISOR HILL: Yes.

21 CHAIRPERSON SAWYER: Ms. Witherspoon, please

22 introduce this item.

23 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr.

24 Sawyer.

25 As staff explained in December, this proposal is

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 1 designed to fix a major flaw in our compliance program for

 2 motor vehicles. ARB's warrantee and recall requirements

 3 are intended to ensure the vehicle emission control

 4 systems remain effective throughout the useful life of

 5 cars and trucks.

 6 Our current regulations have caused many

 7 defective parts to be replaced. However, when the defects

 8 are widespread and costly to fix, staff has been unable to

 9 get automobile manufacturers to do the right thing. They

10 balk at our enforcement actions, counter sue, and refuse

11 to accept full responsibility for ensuring the integrity

12 of the emission control systems they certified when the

13 cars and trucks were new. The proposed amendments to the

14 ARB's existing warrantee reporting and recall regulation

15 fixed this flaw.

16 There are three principle elements of staff's

17 proposal. First, we are requiring corrective action based

18 solely on how many parts have failed. This change avoids
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19 what has turned out to be a protracted exercise with the

20 automobile industry over the representativeness of

21 emissions testing to prove whether those failures caused

22 greater air pollution or not. We're saying simply that if

23 the part's broken and enough vehicles are effected, you

24 haven't fix it, period.

25 Second, we are using extended warranties rather

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 1 than recall as our primary enforcement tool. This tool

 2 will reduce the cost and the hassle of the 100 percent

 3 recall, focusing resources on parts that actually fail.

 4 Third, we are simplifying and reducing the amount

 5 of reporting required in the current program.

 6 At the December Board meeting, you asked us to

 7 flesh out the last-minute changes staff proposed and to

 8 work with industry stakeholders to further refine our

 9 proposal. We have done that through many meetings, a

10 public workshop, and a supplemental staff report. This

11 process resulted in 80 changes to the December proposal,

12 most of which clarify or improve the regulatory language.

13 However, we were not able to achieve full consensus with

14 the industry stakeholders because they are still unwilling

15 to accept unqualified responsibility for the parts of

16 their emission control systems that break during the

17 vehicle warrantee period.
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18 The three main industries affected by this rule

19 are: The automobile manufacturers, heavy-duty engine

20 manufacturers, and after-market service providers.

21 The automobile industry insists that corrective

22 action must be based on emissions testing. Staff

23 disagrees and believes strongly that retaining an

24 emission-based standard will merely continue the status

25 quo of partial remedies and unabated emission increases.

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 1 The automobile industry is also seeking two new escape

 2 clauses that would further weaken ARB's enforcement

 3 program, making it worse than it is today.

 4 The heavy-duty engine manufacturers want

 5 enforcement to be relaxed between 2010 and 2013 when they

 6 are required to meet new emissions standards and begin

 7 implementing on-board diagnostic systems. Staff thinks

 8 that is neither necessary nor appropriate. There are no

 9 grace periods for compliance with new mobile source

10 emission standards. The industry is expected to meet

11 them.

12 The independent repair industry is opposed to

13 extended warranties, because they channel repair business

14 to dealerships rather than independent shops. They asked

15 staff to allow independents to perform warrantee repair,

16 but our Legal Office has advised we have no such
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17 authority.

18 Staff believes the proposed regulation has been

19 significantly improved since the December Board meeting to

20 provide background. For those members who were not in

21 Bakersfield in December, staff will briefly describe the

22 current program, the problems that have developed during

23 implementation, and the changes that we are proposing to

24 fix those problems.

25 Tom Valencia of the Mobile Source Operations

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 1 Division will make the staff presentation.

 2 (Thereupon an overhead presentation was

 3 presented as follows.)

 4 AIR POLLUTION SPECIALIST VALENCIA: Thank you,

 5 Ms. Witherspoon. And good morning, Dr. Sawyer and members

 6 of the Board.

 7 Today, I will present staff's revised proposal to

 8 amend the emission warrantee information reporting and

 9 recall regulations. Today's proposal reflects a lot of

10 work by staff and industry stakeholders to improve the

11 proposal we brought to you in December.

12 Staff believes the revised proposal is a better

13 one, even though we have not achieved a consensus with

14 industry. If approved by the Board, this proposal will

15 complete the update of our in-use compliance regulations
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16 and result in more efficient and effective enforcement of

17 California's motor vehicle emission standards and

18 certification requirements.

19 --o0o--

20 AIR POLLUTION SPECIALIST VALENCIA: The main

21 purpose of our presentation today is to describe the

22 process and changes made to the staff proposal since it

23 was presented to the Board in December. Because some of

24 the Board members were not present in December, I will

25 first provide an overview of the emission warrantee

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 1 reporting program, why it's important to ensuring vehicle

 2 emissions stay low in customer use, and use why it needs

 3 revision. Since we have not reached a consensus with the

 4 industry stakeholders, I will end by describing the

 5 remaining issues.

 6 --o0o--

 7 AIR POLLUTION SPECIALIST VALENCIA: Experience

 8 has taught us that assuring low emissions throughout a

 9 vehicle's life requires five different complementary

10 compliance programs.

11 The first is certification, which occurs before a

12 model can be offered for sale by the manufacturer.

13 Certification helps assure the vehicle's emissions control

14 system has been designed to be capable of meeting emission
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15 standards for the vehicle's useful life, which for

16 passenger cars is ten years or 120,000 miles, whichever

17 comes first. This program requires one vehicle to

18 accumulate mileage after which an emissions test

19 demonstrates emissions are below the State standards.

20 The second program assures each production

21 vehicle is built consistently so it meets emissions

22 standards as it roles off the assembly line. This program

23 has been de-emphasized recently because evidence shows few

24 vehicles are built incorrectly.

25 --o0o--

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 1 AIR POLLUTION SPECIALIST VALENCIA: The third

 2 program is the emission warrantee information reporting

 3 program. This program provides an economic incentive to

 4 the vehicle manufacturer to build durable parts and gives

 5 the owner an incentive to repair the car when an emission

 6 control component fails. Statute generally limits the

 7 warrantee period to less than half of the vehicle's life.

 8 More expensive components get a longer warrantee.

 9 --o0o--

10 AIR POLLUTION SPECIALIST VALENCIA: The fourth

11 program is an on-board diagnostics, OBD, which is best

12 recognized by the yellow check engine light on the car's

13 dash. This program is unique in several ways. Its goal
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14 is to identify when a part fails on an individual vehicle.

15 This may be due to a random failure or due to a systemic

16 problem. It is the only program that is in place for the

17 vehicle's full life.

18 --o0o--

19 AIR POLLUTION SPECIALIST VALENCIA: The final

20 program is compliance. Here, we check to see if the above

21 programs have been effective in keeping emissions low and

22 if the emission control components are functioning and

23 durable. The manufacturer must correct any systemic

24 problems found. The correction is often in the form of

25 recall. The compliance program has three parts which I

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 1 will discuss next.

 2 --o0o--

 3 AIR POLLUTION SPECIALIST VALENCIA: ARB relies on

 4 three different post-sale programs to ensure that vehicles

 5 or engines comply with emission standards and test

 6 procedures and are durable in actual customer use. Since

 7 each of these programs can lead to a recall of vehicles

 8 with emission control failures, they are sometimes called

 9 recall programs.

10 The first program in-use emission testing has

11 been operational since 1983. It involves emission testing

12 of groups of similar vehicles. Historically, the ARB has
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13 performed testing which typically occurs within the first

14 half of the vehicle's life. Only a small fraction of

15 vehicle models are tested each year due to resource

16 constraints. A similar program for heavy-duty diesel

17 engines was recently adopted by the Board, and testing

18 will begin soon. To date, 78 groups of vehicles have been

19 recalled because testing showed emission standards were

20 being exceeded.

21 The second program assures that the on-board

22 diagnostic system has been properly designed and

23 identifies failed or warn components in use. This program

24 focuses on the first few years of the vehicle's life and

25 has resulted in 28 recalls to improve the functionality of

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 1 OBD systems.

 2 The third program is the subject of today's

 3 proposal. Warrantee reporting is designed to identify

 4 emission control components that have systemic failures

 5 that cause excess emissions. The reporting occurs only

 6 during the warrantee period which is typically the first

 7 five years for passenger cars. This program has resulted

 8 in over 178 recalls or other corrective action since it

 9 began in 1990. It's one of the most comprehensive and

10 important in-use compliance programs.

11 --o0o--
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12 AIR POLLUTION SPECIALIST VALENCIA: The emission

13 warrantee information, reporting, and recall program

14 utilizes manufacturers' emission warrantee records to

15 identify emission control components that are failing in

16 customer use. If the failure rate is too high, corrective

17 action is required. This program was first implemented

18 with the 1990 models. The warrantee reporting

19 requirements are shown in this slide for the current

20 program and for the staff proposal. Early warning reports

21 simply provides a heads-up that a problem may be emerging.

22 The current one percent warrantee threshold is too low,

23 generating too many reports. And staff is proposing to

24 increase it to four percent.

25 The next report occurs at a four percent

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 1 warrantee claim rate. At this point, the manufacturer

 2 must determine if all the warrantee claims are valid. And

 3 if not, what is the true failure rate. The reports often

 4 find the rate is below a valid four percent rate and

 5 subsequent tracking and reporting is required. Staff is

 6 proposing to increase the threshold for reporting to ten

 7 percent. Experience indicates that when warrantee claims

 8 exceed 10 percent, there will nearly always be a valid

 9 failure rate in excess of 4 percent.

10 When a valid four percent failure is reached, a
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11 systemic problem is considered to exist and the

12 manufacturer is subject to corrective action. Corrective

13 action has historically been a recall to replace the

14 problematic component with an improved one.

15 More recently, the staff has agreed with industry

16 to extend warrantees instead of recall, relying on the OBD

17 system to determine when the part has failed. As part of

18 its proposal, staff is proposing that most corrective

19 action for failing components be a warrantee extended to

20 the vehicle's useful life. This approach reduces the cost

21 of effective action and hassle to the consumer of the

22 recall. Only catalysts and other after-treatment devices

23 would result in a recall. Recall would also be the remedy

24 if a functioning OBD is not present.

25 --o0o--

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 1 AIR POLLUTION SPECIALIST VALENCIA: The current

 2 warrantee reporting program is flawed, and vehicles with

 3 failing components are not being corrected. The

 4 fundamental flaw is that vehicle manufacturers claim that

 5 ARB must show that emission standards are exceeded before

 6 corrective action can be required. Many of the warrantee

 7 reports staff receives claim no corrective action is

 8 required because emissions won't increase enough to exceed

 9 standards.
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10 In a hearing requested by Toyota, an

11 Administrative Law Judge ruled we had to show Toyota's

12 evaporative control system would fail in sufficient

13 numbers to cause an emissions exceedance even though it

14 was the OBD system, not the evaporative system, that had

15 failed. As a result, 300,000 vehicles with inoperable OBD

16 systems remain in use, unable to detect an evaporative

17 emission failure when one occurs. The Board later amended

18 the recall regulations for OBD to require a recall based

19 solely on whether the OBD system fails to work, thereby

20 removing any tie to exceeding emission standards.

21 In a recent settlement with DaimlerChrysler,

22 staff was forced to exclude over 100,000 vehicles from

23 having a brake engine catalyst replaced because it could

24 not demonstrate that emission standards would be exceeded

25 for each of the many groups of vehicles affected.

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 1 Staff acknowledges that manufacturers have agreed

 2 to many recalls and corrective actions based on the

 3 current warrantee reporting system. Unfortunately,

 4 proposed corrective actions that involve a large number of

 5 vehicles with failed parts that are costly to replace,

 6 such as the catalyst, are the ones that successfully

 7 resist under the current regulations.

 8 --o0o--
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 9 AIR POLLUTION SPECIALIST VALENCIA: The most

10 important improvement to the warrantee reporting program

11 is to base the need for corrective action on the valid

12 failure rate as reported by the vehicle manufacturer. The

13 staff proposal would eliminate exceedance of the emissions

14 standard as a criterion for requiring corrective action.

15 --o0o--

16 AIR POLLUTION SPECIALIST VALENCIA: Vehicle

17 manufacturers testified in December that the decision to

18 take corrective action should continue to be based on

19 exceeding the emissions standard. This graph shows why

20 this is not a good choice for air quality. The orange

21 line shows the accepted emissions of a properly

22 functioning automobile. Emissions start out well below

23 the standard and increase until they are near the standard

24 at the end of the vehicle's useful life.

25 --o0o--

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 1 AIR POLLUTION SPECIALIST VALENCIA: The yellow

 2 line shows the emissions path caused by a failed emission

 3 control part. In this example, the emissions grow at a

 4 faster rate than their normal vehicle, but do not exceed

 5 the emissions standard. If the corrective action were

 6 based on exceeding the emission standard, the excess

 7 emissions, the area between the two lines, would not be
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 8 corrected.

 9 The green line represents failures to whose

10 severity increases as the vehicle ages. Excess emissions

11 are much greater than the first example. However, because

12 the decision to require corrective action occurs during

13 the warrantee period, shown by the shading, no corrective

14 action would occur because within the warrantee period the

15 vehicle is still below the emissions standard. Yet, the

16 excess emissions caused by the failed part would increase

17 rapidly in the second half of the vehicle's life exceeding

18 the emission standard. With staff's proposed amendments

19 to the regulation, the excess emissions in both cases

20 would be eliminated by requiring corrective action when

21 the warrantee rate indicates a systemic failure is

22 present.

23 --o0o--

24 AIR POLLUTION SPECIALIST VALENCIA: The second

25 major improvement to the warrantee program proposed by

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 1 staff is to allow for extended warrantees in lieu of a

 2 recall as corrective action. We are proposing this

 3 change, because we think it's the right thing to do, not

 4 because it has been advocated by any stakeholder.

 5 With the advent of OBD II, a vehicle can detect

 6 when most emission control component failures occur. Even
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 7 when the design of a part is flawed, not every part will

 8 fail in use. Thus, the cost of the warrantee recall

 9 program can be reduced by correcting only those parts that

10 have actually failed. Fewer owners are inconvenienced as

11 well. Only in the case of catalysts and other

12 aftertreatment would a recall be used instead of an

13 extended warrantee. Ironically, auto makers are opposed

14 to this money-saving change, and the independent repair

15 groups favor it only if they can perform the warrantee

16 repairs, something we do not have the authority to

17 consider.

18 --o0o--

19 AIR POLLUTION SPECIALIST VALENCIA: The third

20 major change is to reduce reporting and paperwork

21 requirements as described in the previous slide. We are

22 aware of no opposition to this change. If adopted by the

23 Board, all changes would begin with the 2010 models and

24 affect passenger vehicles, truck engines, and motorcycles.

25 --o0o--

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 1 AIR POLLUTION SPECIALIST VALENCIA: The Board

 2 continued the December hearing and directed staff to

 3 continue working with the interested stakeholders. The

 4 Board suggested the staff proposal was on the right path,

 5 but more time was needed to consider the concerns raised
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 6 by industry stakeholders, including providing specific

 7 regulatory language for the conceptual changes staff have

 8 offered at the hearing.

 9 --o0o--

10 AIR POLLUTION SPECIALIST VALENCIA: In response

11 to the Board's directive, staff held numerous meetings

12 with all affected industries and associations to discuss

13 further changes to its proposal. Staff issued a

14 supplement to the staff report on January 23rd. The

15 supplement provided regulatory language for the conceptual

16 changes staff proposed at the hearing. Also included was

17 an expanded cost to this impact study in response to auto

18 industry testimony that staff failed to adequately assess

19 alternatives the industry had suggested.

20 On February 8th, staff released an updated

21 version of its proposal incorporating additional changes

22 based on meetings with industry. On February 14th, staff

23 held a second public workshop to discuss the revised

24 proposal in detail and accept the additional comments from

25 industry. Finally, the proposal before you today was

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 1 released on March 9th to allow stakeholders additional

 2 time to prepare for this hearing.

 3 --o0o--

 4 AIR POLLUTION SPECIALIST VALENCIA: Staff is
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 5 proposing several significant changes developed during the

 6 post-December hearing process. Staff have proposed that

 7 as a remedy warrantees could be extended to 150,000 miles

 8 for passenger vehicles and 200,000 miles for heavy truck

 9 engines. Industry had argued that an extended warrantee

10 that exceeds the useful design life of the vehicle or

11 engine would result in warrantee claims not related to the

12 flawed design of the part.

13 Staff is now proposing that a corrective action

14 involving extended warrantee be limited to the regulatory

15 useful life of the vehicle or engine. This change

16 shortens the extended warrantee by 30,000 miles for

17 passenger vehicles. It also shortens the extended

18 warrantee vehicle for light and medium-duty diesel

19 engines, but it extends it to 435,000 miles for large

20 diesel engines typically used in over-the-road trucks.

21 Staff has also added a provision that allows a

22 manufacturer the option at its choice of recalling

23 vehicles with a systemic failure instead of extending the

24 warrantee.

25 Statute provides for a hearing should the

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 1 manufacturer disagree with staff's decision to order a

 2 recall. The staff has added at the request of the

 3 manufacturers an opportunity for a hearing when staff
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 4 orders an extended warrantee instead of recall.

 5 Manufacturers testified it was impossible to demonstrate

 6 in the certification application that their emission

 7 control devices would not fail at a rate in excess of 4

 8 percent during the warrantee period. Staff included in

 9 its proposal a required statement by the manufacturer

10 attesting to the vehicle's durability because this

11 provides the necessary legal tie to the certification

12 procedures needed to base corrective action on the

13 warrantee failure rate and thus is essential to the

14 proposed changes to this program. Staff has revised the

15 required statement to make it clear that no additional

16 demonstration of durability is required.

17 In total, the post-hearing process has resulted

18 in over 80 changes to the staff proposal. Most improve or

19 clarify the language and concepts presented at the

20 December hearing.

21 --o0o--

22 AIR POLLUTION SPECIALIST VALENCIA: Staff has

23 used warrantee reporting data from prior years to project

24 the future impacts of the proposed revisions. The number

25 of vehicle groups subject to corrective action is expected

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 1 to double as more failures identified by warrantee claim

 2 reports become subject to corrective action. Achieving
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 3 this outcome is the reason why we are proposing changes to

 4 the warrantee reporting program.

 5 The number of recalls is expected to decrease by

 6 90 percent because most corrective actions will be in the

 7 form of an extended warrantee.

 8 We look at how individual manufacturers would be

 9 impacted. Of 35 light-duty vehicle manufacturers, 17 will

10 have no failures identified in a typical year. Thirteen

11 more will identify three or fewer failures per year

12 amongst all of their models. Five manufacturers will

13 account for 37 percent of all corrective actions. We

14 expect that the revised program will increase the pressure

15 to improve quality and durability and ultimately reduce

16 the number of problematic emission control components used

17 on future vehicles.

18 --o0o--

19 AIR POLLUTION SPECIALIST VALENCIA: The

20 automobile industry continues to insist that corrective

21 actions be based on a demonstrated exceedance of the

22 emission standards. Their latest communication asked that

23 this consideration be brought up during an appeal hearing

24 process. They have also questioned ARB's authority to

25 base corrective action on anything other than exceedance

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 1 of an emission standard. ARB's legal counsel is confident
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 2 we have such authority.

 3 The auto industry has also requested that

 4 unforeseen circumstances and excess cost be additional

 5 considerations that could void the need for corrective

 6 action. Staff has not accepted these suggestions, because

 7 they perpetuate the flaw in the current regulation that

 8 has resulted in vehicles with failed emission control

 9 components avoiding corrective action. Thus, adopting

10 their suggestions would strike at the heart of the staff's

11 proposal to include the program. The two new

12 considerations suggested by the auto industry would

13 further erode the effectiveness of this program.

14 --o0o--

15 AIR POLLUTION SPECIALIST VALENCIA: The

16 heavy-duty diesel engine industry has requested for the

17 2010 to 2013 model year engines higher thresholds before

18 reporting or corrective action are required. They point

19 out that the emission standards are changing in 2010 and

20 new OBD requirements are being phased in between 2010 and

21 2016. Implicitly, they're suggesting that higher failure

22 rates of newly designed emission controls may occur,

23 increasing their compliance and warrantee cost. Staff

24 believes their proposal sets a bad precedent by relaxing

25 compliance and enforcement requirements every time a new

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 1 engine or vehicle emission standards are tightened.

 2 --o0o--

 3 AIR POLLUTION SPECIALIST VALENCIA: The

 4 heavy-duty engine industry also objects to staff

 5 increasing the period for which an extended warrantee

 6 remedy applies from 200,000 to 435,000 miles.

 7 Staff is proposing this change for two reasons.

 8 First, it's consistent with the newly proposed change that

 9 the extended warrantee should be for the vehicle's or

10 engine's useful life. 435,000 miles is the regulatory

11 definition of useful life for a large heavy-duty diesel

12 engine. Although in practice, this type of engine lasts

13 for a million miles or more.

14 The second reason is 200,000 miles is typically

15 accumulated in the first two years of truck use following

16 sale. By the time a component failure had identified the

17 manufacturer through the warrantee claims, reported to

18 ARB, and corrective action notices are sent out, the

19 period of extended warrantee would have passed, rendering

20 a warrantee extended to 200,000 miles useless as a remedy.

21 --o0o--

22 AIR POLLUTION SPECIALIST VALENCIA: The

23 independent repair industry opposes extended warrantees.

24 They believe car owners who return to a dealer to obtain a

25 warrantee repair will have other services, such as an oil

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 95

 1 change or brake reline, performed while they are there.

 2 ARB contracted with the RAND Corporation to study

 3 this phenomenon where the 150,000 mile extended warrantee

 4 applies to PZEV vehicles. RAND concluded the loss of

 5 business to the independent repair industry was small,

 6 less than the growth in business expected to occur during

 7 the expanding population and economy. The effect due to a

 8 warrantee extended to 120,000 miles for just a few

 9 components is bound to be significantly less.

10 With regard to authorizing independents to

11 perform warrantee repairs and being reimbursed by the

12 automobile manufacturers, legal counsel has concluded we

13 do not have the statutory authority.

14 --o0o--

15 AIR POLLUTION SPECIALIST VALENCIA: The

16 post-hearing process has led to numerous improvements to

17 the staff proposal. The staff recommends that the Board

18 approve the staff proposal which includes the changes

19 posted on March 9th. Approval of this revised program

20 will result in a more effective and less cost effective

21 action plan to direct failed emission controls. The

22 program will help prevent excess emissions and lead to

23 more durable emission controls on California vehicles.

24 Administrative costs will be reduced for the manufacturers

25 and ARB.
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 1 Thank you. This concludes my presentation.

 2 CHAIRPERSON SAWYER: Thank you, Mr. Valencia.

 3 Madam Ombudsman, please describe the public

 4 participation process that occurred while this item was

 5 being developed and report any concerns or comments you

 6 may have to the Board.

 7 OMBUDSMAN QUETIN: Certainly. Dr. Sawyer and

 8 members of the Board, this recommendation has been

 9 developed with input from the automotive industry,

10 Alliance of Automobile Manufacturers, Association of

11 International Automobile Manufacturers, Aftermarket

12 Industry Association, Councils of California, and

13 California Automotive Wholesalers Association, engine

14 manufacturers, Motorcycle Industry Council, and the U.S.

15 EPA.

16 The regulatory process to these proposed

17 amendments began in December 2005. They held five public

18 workshops: On May 5th, 2006, in El Monte and another on

19 February 14th, 2007, also in El Monte. There were 13

20 individual meetings with industry and their associations.

21 In addition, staff held eight teleconferences from May

22 2006 through late February 2007. An average of 25

23 participants attended most meetings, teleconferences, and

24 workshops. A few meetings had approximately ten

25 stakeholders.
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 1 The staff report was released on October 20th,

 2 2006, via regular mail, electronic mail, and web posting.

 3 A supplemental staff report was released on January 23rd,

 4 2007. The electronic mail and web posting and via regular

 5 mail on January 26th. There are nearly 1500 stakeholders

 6 on the mail list and slightly more than 3,000 on the list

 7 serve. Unfortunately, in spite of these efforts, many

 8 stakeholder issues failed to be resolved, and you will

 9 hear their comments shortly.

10 Thank you.

11 CHAIRPERSON SAWYER: Thank you very much.

12 Do Board members have any questions?

13 BOARD MEMBER RIORDAN: Mr. Chair, it's not a

14 question but a comment. I want to thank the staff for the

15 update. I'm particularly pleased that the appeal process

16 has been added. I think that was my very serious concern

17 when we heard this before. And I have a lot of comfort

18 now that that has been included. And I want to thank the

19 staff for that.

20 CHAIRPERSON SAWYER: Ms. D'Adamo.

21 BOARD MEMBER D'ADAMO: Just wanting to put this

22 in context in terms of emission reductions. Looking at

23 slide 19, can you quantify the emission reductions that we

24 will be seeing under this? Or if not, just using that
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25 Daimler case as an example.

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 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We did

 2 not attempt to quantify the emission reductions for the

 3 future because, of course, it depends on us predicting how

 4 many failures are going to occur. And our objective with

 5 these programs is not only to direct failures but also the

 6 fact that they're somewhat onerous provides an incentive

 7 for manufacturers to build more durable cars that fail

 8 less often. We can't tell from year to year exactly what

 9 will happen. But that's clearly because there's going to

10 be more vehicles recalled or have a remedy for them as

11 shown in the first bullet, that means there are more

12 excess emissions out there that will get corrected under

13 this program than before. But we didn't try to quantify a

14 number because this is really an enforcement program, and

15 we don't typically do that.

16 In the Daimler case -- I'm sorry I didn't follow

17 up on that part. You know, there were roughly 100,000

18 catalysts that we think should have been replaced that we

19 were unable to get replaced. And while Annette finds

20 that, emissions of some of those catalysts at the state in

21 which we determined their failures, which is again fairly

22 early in the life, have emission impacts as high as three

23 times the standard. Other ones were still below the
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24 standard and yet part of the catalyst had already fallen

25 out of the tailpipe. So you predict what's going to

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 1 happen in the future as mileage accumulated on those

 2 vehicles.

 3 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

 4 MURCHISON: Okay. I found it in the original staff

 5 report. 100,000 light-duty trucks that we mentioned that

 6 we did not get to that had a failing in catalyst assuming

 7 the best case where it's just cracks, the excess NOx

 8 emissions were 54 tons per year. Assuming the worst case

 9 that it deteriorates to the point of being broken apart

10 and blown out the catalyst, it would be 1783 tons per year

11 of NOx. And so we did see a mix of those two cases.

12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In that

13 worst case situation, just this one group of cars, roughly

14 three or four tons a day which as I said before, we start

15 drooling when we see one ton per day emission reduction

16 possibility. So the benefits can be very high.

17 CHAIRPERSON SAWYER: Ms. Berg.

18 BOARD MEMBER BERG: Thank you, Chair Sawyer.

19 The last two slides, which I don't think we went

20 over, slide 25 and 26, is a chart on the useful life

21 versus the warrantee period. And could you just run over

22 those two again and specifically pointing out where the
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23 statute is for the warrantee period and maybe our thinking

24 behind going from the statute period to the useful life.

25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Okay.

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 1 This slide helps understand that there are certain

 2 characteristics and limitations of this program. The

 3 first limitation is the fact that we only get reporting of

 4 warrantee during the warrantee period. And as it's shown

 5 here in the yellow square, for many parts that's only

 6 three years or 50,000 miles. So that's less than half of

 7 the vehicle's life. After you get beyond that in years or

 8 miles, we don't get any more reports. So we don't know if

 9 the parts beyond then are failing increasing at increasing

10 rate or what because there's no longer a warrantee to

11 generate a warrantee claim, which is what we base this

12 program on.

13 So by definition, this program does find early

14 indications that there is a problem with a part and then

15 we believe that there's pretty good evidence that when

16 there's an early indication, it means there's going to be

17 a bigger problem in the future. So as you go out into the

18 blue box, this is the big blue box is the period by which

19 the vehicle is supposed to last. And that's called the

20 useful life. That's a regulatory provision.

21 And so we think that if we're not going to recall
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22 a part early on and fix all of them, that there's a strong

23 argument that if we rely on OBD, there should be an

24 extended warrantee to cover when that part does fail on an

25 individual vehicle for the useful life. And the idea

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 1 there is that if there is a warrantee on the part and it

 2 fails, then the public, the owner of the car is more

 3 likely to get it fixed than not. And if it's going to be

 4 their burden to pay for the costs, then there's always the

 5 probability that it will not be fixed for one reason or

 6 another. That's why we picked the useful life.

 7 We got into this whole debate about the proposing

 8 150,000 miles, because there are a group of cars. Within

 9 the car/light truck category, there are two useful lives.

10 So half of the vehicles ultimately there have 150,000

11 miles, and half of them will have 120,000 miles. And I

12 think the industry fairly made the point that for those

13 that only have 120,00 miles, it's entirely possible they

14 could have designed the part so they started failing due

15 to end-of-life considerations at 121,000 miles. Because

16 that part had a defect in it, they would be paying for --

17 even though it hadn't failed on that car, they would be

18 paying for normal end-of-life failures as a result of the

19 recall extended warrantee action, and that probably didn't

20 make sense. So we decided to tag it to the actual useful
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21 life for every vehicle category. And in the case of cars

22 where there are two of them, we took the shorter one.

23 BOARD MEMBER BERG: And if I could just have you

24 address one other issue that I've heard over and over from

25 the industry, and that is that there would be some parts

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 1 to a system that would not cause an emissions problem.

 2 And how are we going to reconcile the cost of extended

 3 warrantees or recalls versus the severity of the problem.

 4 Is our position strictly if it's broken, you will fix it?

 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We have

 6 a provision in there that says if there's no way the part

 7 can cause an emission increase, it doesn't count for this

 8 program. And an example of that might be the catalysts

 9 are warranted and that includes a heat shield on there.

10 If the heat shield falls off, that might burn up the car,

11 but that's not going to necessarily cause any emission

12 increase. There's things like that where you could argue

13 that the part would -- no impact on emissions, and those

14 do not get recalled under this program.

15 But the debate with the auto industry is they

16 want to see the emissions half to go up all the way to the

17 emissions standard. And when you're operating on data

18 that's in that yellow box, the emissions by definition

19 tend to be pretty low. And if the part is just starting
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20 to fail but getting claims on it, those increases are

21 likely to be somewhat small. As we showed on that

22 hand-drawn chart what the consequences in the gray and

23 blue part of the box can be much, much greater than we can

24 actually quantify in the yellow box. And that's why we

25 think once you achieve four percent failure rate, that's

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 1 enough evidence to say a mistake has been made. This part

 2 is not operating correctly. There will be, by definition,

 3 excess emissions. And given how difficult a time we're

 4 having from the previous presentation finding emission

 5 reductions, we should go after these emission reductions.

 6 And not only do we get the emission reductions, but the

 7 program works one heck of a lot more efficiently than what

 8 we have now.

 9 BOARD MEMBER BERG: Finally, in the appeals

10 process, if there's a disagreement between a manufacturer

11 and staff whether a part does, in fact, have an emission

12 exceedance or not, will that be able to be brought up in

13 the appeals process?

14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah.

15 The appeals process -- we've tried to design the

16 administrative hearing so it deals essentially with

17 counting. Is it four percent? Is it two percent? Are

18 the vehicles that they have excluded for various reasons
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19 from counting towards the defect rate? Have those been

20 properly excluded or not? And they might exclude one by

21 saying there is no impact on emissions and our staff might

22 say there is. And in that case, that would be brought up

23 in this hearing.

24 What we're trying to avoid is using the hearing

25 to re-introduce the idea, well, yeah, the emissions went

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 1 up from some of these parts, but not enough for you to

 2 worry about. That's the debate we're in now. And we find

 3 it very difficult to prove. And even though the industry

 4 said, well, they'll prove it for us, I think that we're

 5 concerned that that proof is maybe not representative of

 6 what will happen in the future of those parts. They're

 7 broken. They ought to be fixed.

 8 BOARD MEMBER BERG: Thank you very much.

 9 CHAIRPERSON SAWYER: Professor Sperling.

10 BOARD MEMBER SPERLING: I want to note that this

11 is an extremely important program. I remember seeing data

12 back 15 years ago where the deterioration rates and the

13 emissions from defects and so on were huge. And so

14 there's been tremendous progress. So I want to say that

15 this is a very important program and recognize that.

16 And I came in late to this process. But as I

17 understand it, the key issue seems to be this legal
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18 standing that ARB would have when it's contested by a

19 company, on what basis can they contest it, whether

20 there's emission deterioration or it's a defective part.

21 So this is a little redundant, but I think it

22 would be good to just take the DaimlerChryler case,

23 catalyst case. It seems that's an instructive case for

24 understanding this better. And what you just explained a

25 minute ago, just apply it specifically to that and why ARB

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 1 was not successful in being able to get the full

 2 resolution of that.

 3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In that

 4 case, again just to recap it, there were Dodge trucks and

 5 Jeeps that were affected I think over five model years.

 6 And the most common thing that caused everyone to know

 7 there was a problem -- the common thread that caused

 8 people to know there was a problem was the catalysts

 9 started falling apart. People would hearing a rattling,

10 and that would cause them to go to the dealer and diagnose

11 the problem as your catalyst is falling apart. In that

12 case, we probably had 20 different engine -- 30 different

13 engine families. That means certain kinds of Jeep, small

14 Jeep with a certain engine, a large Jeep with a different

15 engine. That's a distinguishing factor or feature of an

16 engine family. There were all those different groups of
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17 engines.

18 And the industry argued, first of all, that we

19 had to show in each individual case 30 different times

20 that there was enough failure and a failure of a high

21 enough degree to cause the vehicles on average -- all the

22 vehicles of that type to exceed the emission standards.

23 And in the case of where the catalysts were empty, the

24 claims were hitting 70 percent. In one case, they agreed,

25 fine, we'll take care of the problem. We'll fix it. But

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 1 in those other cases, they relied on this emission

 2 demonstration and our inability to do it 30 different

 3 times as a reason why we couldn't recall those.

 4 So within those groups, the two-thirds basically

 5 or almost three quarters that did not get recalled, there

 6 were a number of engine families that had a verified

 7 failure rate that exceeded 10 percent. Not just to the

 8 unverified one, but the verified one that compares to our

 9 four percent threshold, they were over 10 percent we

10 didn't end up recalling those. They stayed out there.

11 There were varying other degrees, some extended

12 warrantees. It was complicated by the fact the OBD system

13 didn't work either. And it was defective, and we had to

14 have action on that.

15 But the bottom line was the system didn't work.
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16 It took us three years to get to a point where there was

17 finally an agreement to get a quarter of the vehicles

18 fixed. That and the other case on the OBD system were I

19 think there was an inappropriate tie to emission standards

20 is what really taught us that we need to change something

21 because this program isn't working. And yet you can see

22 from the statistics that most of the recalls are in fact

23 coming from this program compared to the other two that

24 we've had in place.

25 EXECUTIVE OFFICER WITHERSPOON: While this

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 1 enforcement action was underway, our legal staff advised

 2 us we had to settle, because if it went to court we would

 3 lose our shirts because of the administrative law decision

 4 in the case was prejudicial to the ARB. And we were

 5 appalled to hear that if a catalyst was not working on a

 6 car, we had no recourse in a court of law and would lose

 7 because of the legal standard that had been established in

 8 that court decision that we had to prove through extensive

 9 and expensive vehicle testing that the catalyst mattered

10 to the emissions performance of the vehicle. We said if

11 this is the case, we're going to negotiate a settlement

12 and fix this rule so that never happens again.

13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And I

14 want to give you a preview. The auto industry will
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15 testify that, fine, they'll take over the responsibility

16 for doing the testing and they will simplify the testing.

17 They will abandon the idea that the fleet of engines on

18 average has to exceed the standard and would accept an

19 idea that you take an okay car, put the broken part on it,

20 test it. And if it goes over the emission standards, then

21 the remedy would be acceptable.

22 The first program we talked about, which is the

23 emission-based recall testing which was the one we adopted

24 in 1988 and started with the 1990 models, you know, we

25 have been running that program. And the first thing you

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 1 should know is there aren't many failures anymore. And

 2 part of the problem is that they're tied to emission

 3 standards. And at low mileage, these vehicles haven't

 4 exceeded the emission standard, even though their

 5 emissions are higher than they should be with the

 6 defective part.

 7 The other part is that they're just so many

 8 assumptions one has to make, whether we do the testing or

 9 whether the manufacturer does the testing, about what's

10 the representative vehicle. You have to pick a vehicle

11 that's supposedly typical. And we know there's a

12 bell-shaped distribution of emissions. So the tendency of

13 the industry is to want to pick one that's cleaner than
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14 average. The parts don't just -- there's one failure and

15 everyone looks exactly the same. The parts have different

16 kinds of failures. So if you're going to put one part on

17 the car, there's going to be a debate about what is the

18 representative failure. Is it a catalyst that has a

19 crack? Is it a catalyst where the entire guts of the

20 catalysts have blown out the tailpipe? The hundreds of

21 thousands of catalysts in the Chrysler case had all kinds

22 of different degrees of failures. So you get into this

23 debate that just goes on and on.

24 In our recall program, vehicles get excluded

25 because someone didn't do an oil change until 10,100 miles

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 1 instead of 10,000 miles or because somebody hit the car in

 2 the fender. They get thrown out as being not

 3 representative, which essentially means that the sample

 4 gets cherry picked until it's the most representative of

 5 how clean the engine might be rather than how dirty it

 6 might be.

 7 These are problems we've experienced over

 8 ten years. That's why we have over well over 15 years or

 9 more now we have a cumulative failure recall rate of 70 or

10 something engine families out of our testing program. And

11 yet in a much shorter period, we have 100 and some

12 failures that have led to recalls out of this warrantee
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13 reporting program. This program has the potential to work

14 much more efficiently and better. But it's not working

15 now without these changes.

16 CHAIRPERSON SAWYER: Question. Are there any

17 circumstances under which light-duty vehicles

18 manufacturers have liability for emissions beyond the

19 useful life?

20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well,

21 we have used the extended warrantee remedy instead of

22 recall in the past. And we did agree with the

23 manufacturers in several cases that the extended warrantee

24 might go as far as 200,000 miles. Largely, that depends

25 on when you found the problem what the mileage on the

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 1 vehicles are and how many years we debate this before we

 2 get to that point. So if the problem occurred at 70,000

 3 miles but the cars are 120 by the time we get around to

 4 deciding what to do because of all the problems with the

 5 current program, then we have extended the warrantee

 6 beyond the useful life in that case with their agreement.

 7 That's the exception I think.

 8 CHAIRPERSON SAWYER: This regulation doesn't

 9 preclude doing that?

10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No.

11 Probably doesn't preclude it. But I think by setting it
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12 at the useful life, it greatly decreases the chance we'll

13 will end up negotiating something beyond 120,000 miles.

14 CHAIRPERSON SAWYER: What fraction of vehicles in

15 California have a real life greater than the useful life?

16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I

17 believe the regulatory definition that we've used for

18 useful life is that half of the vehicles originally sold

19 have departed the fleet at the useful life. That's

20 probably not believable at ten years. I think the current

21 data probably would put it much further out than that,

22 more like 15 years.

23 CHAIRPERSON SAWYER: Were there any other

24 questions from the Board?

25 If not, we'll begin the public testimony. The

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 1 first three speakers are Steven Douglas, David Patterson,

 2 and Sara Rudy.

 3 (Thereupon an overhead presentation was

 4 presented as follows.)

 5 MR. DOUGLAS: Thank you, Dr. Sawyer, members of

 6 the Board. I'm Steven Douglas with the Alliance of

 7 Automobile Manufacturers. And our member companies -- I

 8 think you're familiar with the Alliance.

 9 We have again split our presentation into parts

10 so we can get through it in a timely manner.
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11 --o0o--

12 MR. DOUGLAS: First, throughout this rulemaking

13 process, we've supported the goals that ARB staff set out

14 to achieve here. And that's a fair system that allows ARB

15 and industry to identify and track emission-related

16 defects. It provides for a prompt and appropriate

17 remedial action when a vehicle does exceed emission

18 standards because of a defect.

19 It ensures environmental benefit. It provides

20 clarity and certainty to ARB and the manufacturers. And

21 finally, it allows for due process. However, the proposal

22 that you have before you today and the one in October, it

23 contains unnecessary elements that are not needed to

24 achieve these goals. And they're inappropriate in terms

25 of policy, procedures, and substance.

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 1 --o0o--

 2 MR. DOUGLAS: In December, we identified the four

 3 issues noted above. At the hearing, the Board

 4 specifically asked the staff to address the extended

 5 warrantee beyond useful life, and as specifically

 6 directed, the revised proposal and its extended warrantee.

 7 However, the other three issues have remained unchanged,

 8 despite not one proposal but two by the Alliance where

 9 we're trying to reach an agreement with staff.
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10 And, finally, although this is not one of our

11 issues, the regulatory costs have been miscalculated. In

12 October and the December hearing, the staff said this

13 regulation would have absolutely no cost whatsoever. Then

14 when questioned by the Board, they changed their mind and

15 said, no, it's two million dollars a year.

16 We retained UCLA Professor Scott Carr, and he

17 concluded that the staff's analysis and methodology are

18 fundamentally flawed. But even using their methodology

19 and just correcting the math yields a regulation that's

20 $15 million a year. And, again, there's been no benefit

21 calculated of this regulation.

22 --o0o--

23 MR. DOUGLAS: So I just want to wrap up our

24 comments today by summarizing the Alliance's proposal.

25 First, again, we support the goals of the rulemaking. We

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 1 believe they can be accomplished. However, the current

 2 proposal doesn't do this. So in an effort to reach a

 3 compromise, we propose two alternatives. We think they're

 4 both fair and reasonable.

 5 The first provides regulatory changes to

 6 incorporate a test of the emission standard. It provides

 7 manufacturers with due process. And it eliminates the

 8 compliance statement, which is unnecessary if the emission
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 9 standards are used as a yardstick, as they've been done

10 for decades.

11 And just to point out too that emission

12 standards, we use them for everything. In fact, for the

13 on-board diagnostic thresholds, we put defective parts on

14 the vehicle and we test them to the emission standard.

15 That's how we do it. We've been doing that for ten years

16 now.

17 The second proposal recognizes that our issues

18 merge in the area of due process. In this alternative,

19 the staff's proposal would stand in every way but the

20 public hearing section. Our proposal expands this section

21 to include a meaningful hearing, to allow a judge to

22 preclude recalls and other remedial action if, and only

23 if, the manufacturer could prove by a preponderance of the

24 evidence that a recall or remedial action was

25 inappropriate.

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 1 And we believe that both of these proposals or

 2 either of these proposals are reasonable and that they are

 3 in fact not the status quo. However, if the Board is

 4 uncomfortable with either of these, we would ask that you

 5 specifically direct the staff to work with the industry to

 6 resolve our issues.

 7 With that, I'd like to turn it over to -- I'll
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 8 take any questions that you have, and David Patterson will

 9 talk about the emission standards.

10 CHAIRPERSON SAWYER: There appear to be no

11 questions.

12 MR. PATTERSON: Good morning, Dr. Sawyer, Board

13 members. My name is David Patterson. I'm with Mitsubishi

14 Motors Research and Development.

15 --o0o--

16 MR. PATTERSON: This table summarizes

17 ARB's/industry issues. As in December, industry remains

18 confident we can develop a regulation that satisfies all

19 the issues.

20 --o0o--

21 MR. PATTERSON: Evaluating vehicle emissions with

22 respect to standards has always been central when

23 considering an order to recall. Previously, the only time

24 ARB has considered ignoring emissions standards was in

25 1988. However, the Board rejected that proposal. After

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 1 subsequent discussions, the Board approved the regulation

 2 as they are today.

 3 As you can see here, ARB staff proposals

 4 regarding emission testing and standards has not changed

 5 since their October proposal. In fact, ARB staff has been

 6 completely unwilling to accept any compromise, despite our
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 7 repeated efforts to find one. Most importantly, ignoring

 8 emissions standards can lead to expensive recalls and

 9 remedial actions in situations when there is no air

10 quality benefit.

11 --o0o--

12 MR. PATTERSON: I've shown this slide before.

13 The point is under the proposed regulation, hypothetical

14 Vehicle B would be subject to recall, extended warrantee,

15 or both, even though its emissions are 50 percent below

16 the emission standard.

17 One of staff's three stated reasons for revising

18 the regulation is the need for consistent, quick, and low

19 cost determination of violation. As we have said, this

20 can be addressed, and this can be addressed without

21 ignoring emissions standards.

22 --o0o--

23 MR. PATTERSON: The January 23rd staff report

24 seems to indicate that emissions testing is hopelessly

25 flawed. However, laboratory emissions testing to

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 1 demonstrate compliance with the standard is the very

 2 backbone of ARB's regulations and has been for decades.

 3 In fact, emission standards and testing are currently used

 4 for: New vehicle certification; in-use verification

 5 testing; in-use compliance testing; and OBD diagnostic
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 6 thresholds.

 7 In fact, as Steve said, the OBD program uses an

 8 identical procedure to our proposal. The vehicles are

 9 aged to a useful life, and then the defective component is

10 installed. This allows the direct evaluation against the

11 useful life emissions standards.

12 --o0o--

13 MR. PATTERSON: We propose testing of vehicles

14 with a defective component installed in a straight forth

15 manner. Please note, this is different from the current

16 process under the current regulation. We propose to

17 install a defective component on the vehicle, measure the

18 vehicle's emissions, compare the measured emissions to the

19 applicable standard. And if the vehicle exceeds the

20 emissions standard, then remedial action is appropriate.

21 In fact, this was staff's own proposal last April.

22 --o0o--

23 MR. PATTERSON: Therefore, the Alliance has

24 proposed two methods for resolving this issue.

25 First, incorporate emissions standards into the

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 1 regulation as previously proposed by staff. Or, second,

 2 no remedial action for a manufacturer if it can prove

 3 through sufficient data that the vehicle cannot exceed the

 4 emissions standard with the defective component installed.
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 5 We believe that these are both reasonable

 6 alternatives. However, we are wed to neither. We would

 7 happily continue to work with staff to develop a

 8 recommendation that accomplishes their goals and resolves

 9 our concerns.

10 And I'm open for questions.

11 CHAIRPERSON SAWYER: Ms. Berg.

12 BOARD MEMBER BERG: I would just like staff's

13 comment. This is an important issue for me. So I really

14 want to understand.

15 I'm in full agreement that we need to close the

16 gap and what our goal is. I want to make sure that we

17 aren't swinging the pendulum so far that the industry's

18 fear of unreasonable extended warrantees or recalls are

19 going to take place. So for example, on their slide

20 number 8, why recall Vehicle B, again is our position that

21 if it's broken, fix it because we have this engine

22 certified? Or are we dealing with these on a case by case

23 base and determining what needs to be fixed for an air

24 quality benefit?

25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The way

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 1 we would present the slide is Vehicle B would have another

 2 segment of a bar on top of it or wherever you want to put

 3 it that's black, and these are the excess emissions that
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 4 the vehicle has due to the failed part. And if we can

 5 draw that bar or that segment on the top of the bar that

 6 shows excess emissions because of the defect, then we

 7 think the defect should be corrected to reduce the excess

 8 emissions.

 9 EXECUTIVE OFFICER WITHERSPOON: We would also --

10 DEPUTY CHIEF EXECUTIVE OFFICER CACKETTE: Even

11 though it as below the red line at the top.

12 EXECUTIVE OFFICER WITHERSPOON: We would also

13 present the information over time and the anticipated

14 change and deterioration factors over many years of

15 service. Because this is a static picture of at the time

16 the defect is found very early on in the vehicle's life,

17 what its emission are says nothing about whether it will

18 continue to deteriorate and effect the vehicle's normal

19 deterioration cycle.

20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And

21 that black bar -- both those bars are going to grow with

22 time naturally. And the black part that I would draw in

23 on the top of the red bar, which is the excess emissions,

24 is likely to grow as well. So if we were able to create

25 this graph not at three years but at ten years, it's going

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 1 to have a lot higher emissions. And we don't think it's

 2 important that point whether it's above the standard or
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 3 not. It's a chunk of emissions that can be reduced and

 4 that shouldn't be out there in the first place.

 5 BOARD MEMBER BERG: And it shouldn't be out there

 6 in the first place, because when the engine was submitted

 7 for certification, the process said that these emissions

 8 would not occur.

 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

10 Exactly. And I think that the corollary here to that is

11 what the industry is saying is it's okay to build cars

12 that have emission control devices that are put on the car

13 to reduce emissions. And if they break and the emissions

14 impact isn't too bad, at least at three years it's not

15 enough to cause the emission standard to be exceeded, then

16 no harm, no foul. And we think that the evidence suggests

17 that there's a foul. And we ought to get those emissions

18 reductions reduced.

19 And what is the point of having these emission

20 control devices on if a significant fraction of them are

21 broken and the Board just says, oh, never mind. That's

22 okay. It's not enough to worry about. All of our

23 emission factors and all of our planning is all based on

24 these cars staying within the emissions standard for their

25 life that wasn't -- as Dr. Sawyer said before, it wasn't

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 1 the case. Dr. Sperling said we had lots of cars with
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 2 really high emissions, but now they are starting to build

 3 them so they are capable of staying below that line. But

 4 they're not going to be below that line through the full

 5 useful life if there's a splattering of broken parts on

 6 them.

 7 So it's just a question of are those emission

 8 reductions that we want to ignore? Are those emissions

 9 that they claim they own and can do whatever they want

10 with, or are they owned by the public and ought to be

11 reduced if they're caused by a broken part on a car?

12 BOARD MEMBER BERG: So again to clarify that if a

13 part is shown not to have any exceedance, then they could

14 include that in their -- if they hit the ten percent, they

15 can reduce that to justify they're below four percent.

16 And if there is a disagreement with staff, that

17 information can be brought up in the review or the

18 administrative hearing.

19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes.

20 EXECUTIVE OFFICER WITHERSPOON: Except with one

21 qualification. You said if a part can be shown to show no

22 exceedance, that's not the test. If the part has no

23 relationship to emissions whatsoever, like a heat shield.

24 BOARD MEMBER BERG: Okay. Thank you for walking

25 me through this.

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 1 MR. PATTERSON: I would like to say two things

 2 here. That's why the important part of what we proposed

 3 in our emission testing was to evaluate the vehicle at

 4 useful life, not at three years as Mr. Cackette was

 5 saying. We are proposing to show that vehicle at its

 6 useful life so that we can directly evaluate that vehicle

 7 with its full deterioration effects at the emission

 8 standard.

 9 Also, Mr. Cackette, he admitted -- and I know

10 this for a fact from the EMFAC discussions that we had.

11 The EMFAC does not take into account the certification

12 numbers of vehicles when compiling the statewide

13 emissions. They use the in-use emissions factors,

14 surveillance emissions factors, and the emission standard,

15 not the certification numbers. So when he says that we

16 certify at one level and then we begin to emit at a

17 slightly higher level, we'll admit that's going to happen

18 because the vehicles will deteriorate over a period of

19 time. That is the reason that we certify vehicles at a

20 lower level as we know they will deteriorate over their

21 useful life. And our design parameter is at the end of

22 the useful life they are underneath the emission standard.

23 That is what we are required to do by ARB regulations and

24 that's what my company does.

25 CHAIRPERSON SAWYER: It seems to me the industry

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 122

 1 is saying there's an implied principle that you have to be

 2 able to measure the emissions exceedance before we can do

 3 anything about it. I'd just like to point out when I go

 4 in for smog check and I'm missing a gas cap, I don't

 5 expect I have any right to demonstrate that the emissions

 6 are over the standard. I simply replace the gas cap. And

 7 I think there's an analogous situation here.

 8 STAFF COUNSEL OLIVER: Chairman Sawyer, Kurt

 9 Oliver with the Legal Office. I'm sorry to interrupt

10 here.

11 There's another way to understand this which

12 follows off your comments, sir. And it also keys off some

13 of the things that the witness said. To meet our

14 emissions standards, manufacturers do certification

15 testing on a new car in a lab. And we accept those

16 results. And we have other safeguards built into the

17 system to guarantee that the parts that are used on those

18 certification vehicles are durable throughout their useful

19 life. There's a requirement in our law that that be the

20 case.

21 However, there's a loophole in the law, because

22 there's really no definite standard for determining what

23 is durable and what isn't. And in this proposal before

24 you, we're making such a bright line standard. If the

25 parts fail at over four percent level, taking out ones
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 1 that under no circumstances could affect emissions, taking

 2 out ones that fail because of customer misuse or neglect

 3 or taking out ones that are changed out just to satisfy

 4 customers' whims or keep relations with customers good,

 5 then we're saying that that's the bright line. And we

 6 don't mandate particular sets of components in the main on

 7 these vehicles. As you know, we mandate the standards and

 8 the manufacturers decide which components to place on

 9 them. And they certify also that the components are

10 durable when they make that demonstration to us. We're

11 saying to change the test procedures to include a

12 requirement that gives that durability demonstration some

13 actual meaning and that it provides a standard that we can

14 actually implement. And that's the four percent failure

15 rate. Because currently there's a huge loophole in those

16 test procedures that doesn't allow us to enforce when we

17 see these high failure rates.

18 Emission standards; we still would have the

19 authority under the statutory law to prosecute a case

20 under violation of the emission standards. What we would

21 be doing if these proposed amendments were adopted by you

22 would be to eliminate the unnecessarily high unworkable

23 burden that the current regulations impose upon us. And

24 based on 18 years of experience and some very

25 unsatisfactory results and some very important cases,
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 1 we've determined that that's a desirable way to go.

 2 And the lynch pin of the entire thing is because

 3 we've been, based on our experience, able to determine

 4 that we cannot prescribe in a regulatory sense a testing

 5 regime that makes sense to apply in each and every failure

 6 that occurs out there. And that being the case, we want

 7 to retain the authority through the statute to pursue that

 8 on a case by case basis, but to replace the current system

 9 with a bright line that eliminates the uncertainty and

10 will get the parts fixed. Because although these vehicles

11 are certified to our standards in a lab under pristine

12 conditions, they're driven out on the roads. And although

13 we accept those results at the outset of their useful

14 lives, we have developed a great deal of data that

15 indicates those parts fail at excessively high rates.

16 And the current standard which would require us

17 to prove that each and every one of these parts would

18 cause an emissions exceedance is just unworkable from the

19 point of view of getting them fixed.

20 And that's what we're here to do is to get them

21 fixed so that we prevent to unnecessary emissions that

22 occur when they break. And whether those emissions are

23 accounted for in the EMFAC model or not, I think we had a

24 couple of witnesses here this morning that show that in
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25 reality those emissions are emissions that are in the air

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 1 that are measurable that people are exposed to. And we're

 2 here -- the proposal before you is to prevent those kinds

 3 of emissions that occur when parts that are warranted at

 4 the beginning in the lab to be durable to us over the

 5 useful life of those cars become broken and don't work.

 6 And we have a proposal for you that we think will get

 7 those things fixed. We made a very clear simple

 8 regulatory standard that everyone can understand to

 9 accomplish that effect.

10 CHAIRPERSON SAWYER: Thank you.

11 Sara Rudy, and then we will have Tony Martino,

12 Alan Prescott, and Jeffrey Bossert.

13 (Thereupon an overhead presentation was

14 presented as follows.)

15 MS. RUDY: Good morning, Chair Sawyer -- good

16 afternoon now, members of the Board. I appreciate Dave

17 talking about the emission standards, because obviously

18 that's very critical to the auto industry.

19 --o0o--

20 MS. RUDY: And it's related to the issue I wanted

21 to talk about, and that is the compliance statement.

22 --o0o--

23 MS. RUDY: The reason these issues are related is
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24 because the Health and Safely Code allows recalls for

25 violations of the emission standards or test procedures.

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 1 But since the proposal ignores emission standards, that

 2 only leaves test procedures. So this proposal is trying

 3 to shoehorn this four percent defect rate inappropriately

 4 into the test procedures. The statute directed ARB to

 5 adopt test procedures. Clearly intended the procedures to

 6 be just that, procedures. Not an arbitrary percent defect

 7 specification. To be precise, the statute directs ARB to

 8 adopt procedures necessary to determine whether the

 9 vehicles or engines are in compliance with the emission

10 standards. It all ties back to the emission standards.

11 --o0o--

12 MS. RUDY: And even ARB staff had a hard struggle

13 with how to do this. And that's evidenced by the numerous

14 iterations of the proposal. In October, they wanted

15 manufacturers to demonstrate that no emission control

16 device will exceed a four percent failure rate or 50

17 vehicles.

18 When we asked, how do we do this? What data do

19 with show you? What test procedures do we use to

20 demonstrate that? There weren't any answers.

21 So the proposal was revised again in January, and

22 staff indicated, okay, we don't want you to do anything
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23 different with your certification. All we want you to do

24 is sign a statement that says you won't have four percent

25 failure rate. Well, this causes problems too, because we

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 1 can't predict the future. And I don't want to sign a

 2 statement that I don't know if it's going to be true or

 3 not, because I can't predict the future.

 4 So, again, recognizing that might be problematic

 5 as well, the proposal was revised again. And now it

 6 simply declares that if a four percent failure rate is

 7 realized that it's a violation of the test procedure.

 8 This has the same effect. If we don't sign the statement,

 9 we don't get certified, and we can't sell vehicles in

10 California.

11 --o0o--

12 MS. RUDY: So in conclusion, the compliance

13 statement is an issue, because it requires manufacturers

14 to predict the future. And if we're wrong and there is a

15 four percent failure rate, not only are we subject to

16 ordered recall, extended warrantee, or both, it's

17 considered a violation of the test procedure. And we

18 could be subject to fines, and our certification could be

19 jeopardized.

20 So how do we fix this? Put emission standards

21 back into this proposal. If you have emission standards
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22 in there, that gives the Executive Officer the teeth they

23 need to order the recalls. And you don't need to shoehorn

24 this four percent failure rate inappropriately into the

25 test procedures.

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 1 That concludes my comments. I can take any

 2 questions.

 3 CHAIRPERSON SAWYER: Thank you.

 4 Staff want to make a comment on that issue?

 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I'll

 6 make a preliminary one, and then I think legal might want

 7 to say something about it.

 8 First of all, the manufacturers have to test one

 9 car and show that its emissions are below the standard at

10 the end of its useful life. That's the requirement before

11 they can get an approval to sell any cars in California.

12 And they're willing to sign that statement that that is a

13 representative vehicle of all the vehicles they're going

14 to produce.

15 The real world, of course, is that some of their

16 vehicles exceed the emissions standards in use, and they

17 end up recalling them. That doesn't cause their CEO or

18 anyone to go to jail. It says that when you're wrong,

19 there's a remedy. And the remedy happens to be a recall

20 or extended warrantee.
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21 This is the exactly the same thing. They

22 produced a vehicle. They are attesting to its durability

23 for the useful life. And we're saying that if four

24 percent of the parts failed, even one of those parts

25 failed on that one car that's tested to the useful life,

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 1 we wouldn't approve it. Just one. And they'd have to go

 2 back and start over again.

 3 So in the case, we're really not asking them to

 4 do anything more than just say that the car is durable.

 5 And certainly if it's durable, it's not going to have the

 6 four percent failure. The reason we're having them say

 7 this isn't to try to put them on the spot. It is the

 8 legal tie that allows us to recall vehicles based on a

 9 procedural failure rather than emissions standard. That's

10 the bottom line. If we don't have it in there, then I

11 don't believe we're able to execute this as we proposed.

12 It has to be there. And please correct me, Kirk, if I'm

13 wrong on that.

14 SENIOR STAFF COUNSEL OLIVER: Mr. Cackette is

15 entirely correct on that point. And the quotations from

16 the statutes that you saw on the slide are not, of course,

17 complete quotations of the statutory language. It gives

18 us authority in this area. And it does provide us the

19 authority. And I just will read it in 43105. "The
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20 procedures for determining and the facts constituting

21 compliance or failure of compliance shall be established

22 by the State Board." And this is with respect to both

23 emissions standards and test procedures. And it's in the

24 statutory section 43105 of the Health and Safely Code that

25 authorizes us to take corrective action or recall when we

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 1 find such violations to occur.

 2 And to repeat previous remarks, there are

 3 standards in current emission standards and test

 4 procedures that deal with the durability of vehicles.

 5 However, they're not specific, and they don't have a

 6 bright line demarcation to determine when they are

 7 violated or not. And we would provide such a bright line

 8 in these proposed amendments if they were adopted by you.

 9 As far as the changes that the proposal underwent

10 over time, we did work very hard with industry to

11 accommodate their concerns in this area. And they came to

12 us and said that they felt that making an additional

13 demonstration at the time of certification was burdensome

14 and it was their preference not to do that. So to relieve

15 them of that burden, we made the change that you see here

16 today to allow them to make a statement similar to the

17 ones that they do in each and every certification

18 application that they have here today that the components
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19 will be durable. But durable to the level that we would

20 be setting here today. And that would be a fact

21 constituting compliance with the test procedures that

22 falls well within the statutory authority that the

23 Legislature has given us to exercise here.

24 CHAIRPERSON SAWYER: Thank you.

25 Tony Martino.

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 1 --o0o--

 2 MR. MARTINO: Good afternoon. I'm Tony Martino.

 3 I'm with General Motors. I'm representing the Alliance

 4 for Automobile Manufacturers.

 5 I'd like to recap on what we've already covered

 6 today. We first covered ARB's first issue and industry's

 7 first two issues. Alternatives that could reasonably

 8 address these issues, there are alternatives that could

 9 reasonably address these issues for both ARB and industry

10 and they have been discussed.

11 --o0o--

12 MR. MARTINO: Next we would like to turn to the

13 ARB corrective action and industry extended warrantee

14 issue. This is the one issue that was specifically

15 directed by the Board at the December 7th hearing. While

16 the regulations still authorize the Executive Officer to

17 order an extended warrantee, they now limit that warrantee
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18 to useful life. We continue to believe that regulations

19 authorizing an ordered extended warrantee are not covered

20 by the statutes. However, we are appreciative of staff's

21 change as it represents a significant step in the right

22 direction.

23 Finally, I'd like to talk about ARB's last

24 issue --

25 --o0o--

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 1 MR. MARTINO: -- the reporting issue. We stated

 2 at the December hearing that we support this change as it

 3 reduces unnecessary administrative burdens on industry and

 4 the ARB staff. We continue to encourage ARB staff to

 5 regularly look at reporting requirements to determine if

 6 some can be eliminated or consolidated.

 7 Thank you. Any questions?

 8 CHAIRPERSON SAWYER: Thank you.

 9 Alan Prescott.

10 MR. PRESCOTT: Good morning, Mr. Chairman and

11 members of the Board.

12 My name is Alan Prescott of Ford Motor Company.

13 And I come to you again to discuss what I think is a

14 critical issue, which is constitutional due process.

15 Because of time constraints, my colleague, Jeff Clark,

16 will further discuss this issue as well.
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17 Constitutional process is a simple concept. It's

18 one of fundamental fairness. I think the Supreme Court

19 has said this best when it described it as a "fundamental

20 requirement of due process involves the opportunity to be

21 heard at a meaningful time and in a meaningful way."

22 Staff's proposal does neither and continues to

23 violate due process in two critical ways.

24 Number one, the staff's proposal forms an

25 irrebutable presumption of guilt. For what? Haste and

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 1 ease. The Supreme Court has talked of this subject as

 2 well and had said irrebuttable presumptions that the

 3 constitution recognizes higher values than speed and

 4 efficiency and prohibits the use of irrebuttable

 5 presumptions except in those extreme circumstances where

 6 the facts are universally true where there is no possible

 7 way to determine the truth of the matter. Certainly

 8 neither is true here, certainly not by the staff's April

 9 proposal. And the emissions reductions that Mr. Valencia

10 had pointed out in his presentation with the squiggly line

11 certainly don't present a universal truth.

12 The second way that the staff's proposal violates

13 due process is by denying a fair hearing by providing no

14 opportunity to contest anything other than a meaningless

15 number, four percent. Anyone can read what's written in
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16 the manufacturer's report. We need not waste the time of

17 an administrative hearing for it. While it's true staff

18 has graced us by offering an additional administrative

19 hearing for extended warranties, now instead of one

20 meaningless hearing, we have two meaningless hearings.

21 As you can see from the text of the staff's

22 proposal, they're so bold as to ignore not only Title 13

23 and 17 of the California Code of Regulations, both of

24 which already include fair hearing proposals, but also any

25 other proposal of law, including the federal and

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 1 California constitution and due process clauses contained

 2 within.

 3 There are ways to make this administrative

 4 hearing more meaningful. And my colleague, Jeff Clark,

 5 will elaborate more, but I'll recount them briefly.

 6 The administrative hearing must consider whether

 7 the Executive Officer may have abused her power. Prior to

 8 today's revisions, because I have not reviewed them all,

 9 this regulation mentioned the sole and unfair discretion

10 of the Executive Officer no less than 65 times. And yet

11 there is no review.

12 Second, there's no review for undue burden, in

13 cases where the burden and cost to the manufacturer sees

14 no corresponding improvement or benefit to the air quality
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15 of the people of California.

16 Third are the emissions standards, the very heart

17 and framework of all that is done for this Board. And

18 yet, again they propose to ignore them.

19 And, finally, the staff proposes to prohibit any

20 explanation of matters that are completely outside the

21 control or foreseeable foresight of manufacturers.

22 None of these are extraordinary concepts.

23 They're all concepts embodied that are reasonable and a

24 fair opportunity at an administrative hearing would

25 provide due process for both the manufacturer and not

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 1 detract anything from the staff.

 2 These failings may the proposal --

 3 CHAIRPERSON SAWYER: I must ask you to conclude,

 4 please.

 5 MR. MARTINO: I will, sir.

 6 These failings make the proposal both

 7 unconstitutional but also meaningless towards the goal of

 8 efficient air pollution control. And today we've received

 9 another revision to the administrative hearing provision.

10 It's still inadequate. The rule is not ready.

11 That concludes my presentation. I'd be happy to

12 take any questions.

13 CHAIRPERSON SAWYER: Mr. Clark, and then we'll
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14 have John Cabaniss, Pamela Amette, and Roger Gault.

15 --o0o--

16 MR. CLARK: Well, good morning. Thank you for

17 the opportunity to be here, Mr. Chairman. My name is Jeff

18 Clark from Kirkland & Ellis here on behalf of the

19 Alliance. And I'm here to talk about the fair hearing

20 proposal that the Alliance made which really embraces four

21 elements. It creates affirmative defenses. It would make

22 those affirmative defenses defenses that the manufacturers

23 have the obligation to prove, which changes existing law

24 in many respects.

25 Those four emissions affirmative defenses are

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 1 first the emissions standard as we've talked about, the

 2 great salients of that requirement to the operation of the

 3 statute. And it's clear from -- and this relates to the

 4 substance of the proposal that the staff is claiming

 5 authority to do this under the heading of task procedures.

 6 But never before has the Board approved or has staff

 7 proposed to do something substantive -- clearly

 8 substantive like this under the heading of task

 9 procedures. They're task procedures designed in Health

10 and Safely Code to indicate whether and to measure whether

11 there's a violation of emissions standards. That's what

12 the test procedures are for. They're not a grant of
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13 substantive authority to choose any form of procedures

14 that the staff might design. So this first affirmative

15 defense will be built into that hearing process.

16 Second, as my colleague Mr. Prescott pointed out,

17 the proposed regulations are just rife with grants of

18 discretion and oftentimes grants of exclusive discretion

19 and unreviewable discretion to the Executive Officer.

20 That's flatly contrary to due process, and that would be

21 fixed in the fair hearing process by providing an

22 opportunity for manufacturers to demonstrate to a neutral

23 decision maker there had in fact been an abuse of

24 discretion.

25 Third, there would be a defense for undue burden.

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 1 As was admitted here, and particularly in response to

 2 Member D'Adamo's question, there's been no attempt

 3 whatsoever to calculate the emissions benefits associated

 4 with this proposal. So in the absence of that, it's not

 5 surprising I suppose there's been an exclusion by staff of

 6 the ability to try to measure how those emissions benefits

 7 would stack up compared to the relevant cost. We submit

 8 again consistent with due process, the manufacturers need

 9 to have a defense of that nature. But it's also an

10 independent legal violation of staff here to fail to

11 calculate emissions benefits they claim exist.
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12 Lastly, the authority here that the Board has to

13 regulate is to regulate if there's a defect. And a

14 failure on any basis is not equivalent to a defect. A

15 defect essentially is a fault that occurs as a result of

16 the manufacturer's actions. It's their fault.

17 In past instances where the Board has attempted

18 to go beyond that authority, even the California Attorney

19 General has objected. And I'd like to read to you if I

20 could a very brief excerpt from an Attorney General

21 opinion. This is Attorney General Opinion 64 Opinions of

22 the Attorney General 425. And there it's stated that, "if

23 there's a rule by the Board that provides a warrantee for

24 failure to perform at any time during the useful life of a

25 vehicle without regard to any defect in material or

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 1 workmanship, then it constitutes a substantial departure

 2 from and finds no counterpart enabling statutes."

 3 In our view based on the expressed and specific

 4 statutory terms and on those provisions of federal

 5 legislation, the Legislature neither envisioned or

 6 intended to authorize any such performance warrantee. The

 7 warrantee is going beyond the classical definition of

 8 defects. And again, that's precisely what the attorney

 9 general in the past has found to be defective in past

10 Board proposals. These are the fixes the Alliance would
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11 propose.

12 And just to wrap up and summarize our

13 presentation, if I could. We've really had two

14 alternatives. One is the alternative we offered in

15 January to do the testing and to work with staff to design

16 an effective test procedure, or alternatively, to see how

17 all these issues really converge on due process to fix the

18 hearing process by providing for these multiple

19 affirmative defenses to do one of those two things. Or

20 failing that, given the fact this rulemaking continues to

21 be a work in progress as we saw from changes we received

22 just as we walked in the door today, that instead it be

23 pushed back for further consideration and debate and

24 analysis and negotiations between industry and the staff.

25 Thank you.

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 1 And I'd be happy to take any questions.

 2 CHAIRPERSON SAWYER: Ms. Berg.

 3 BOARD MEMBER BERG: Thank you, Chairman Sawyer.

 4 I would just like to -- I understand that

 5 philosophically we have a difference on the emission

 6 standards. So I'm not going there.

 7 But could you just address the abuse of

 8 discretion and the undue burden and the enforcing for me,

 9 please?
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10 MR. MARTINO: Sure. In terms of the abuse of

11 discretion -- oh, I am sorry, staff. I thought that was a

12 question to me.

13 BOARD MEMBER BERG: And I appreciate that. I

14 apologize. That was my fault for not clarifying it. I'd

15 like to have staff respond to your request. Thank you.

16 SENIOR STAFF COUNSEL OLIVER: Thank you, Ms.

17 Berg.

18 You've been presented with two very different

19 views of what fair hearing would be under these

20 regulations. The staff's proposal provides a very fair

21 hearing for the issue that would be present in such a

22 hearing, whether or not a violation of this standard

23 occurred. And if that's the case, then all of the

24 information that's been provided to the Executive Officer,

25 the Executive Officer's response to that information, and

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 1 any other newly acquired information that could not have

 2 been provided at the time that that report was provided

 3 would be the record in such a hearing.

 4 And that's all the evidence that we could think

 5 that is relevant to this standard, whether the standard of

 6 the four percent failure rate has been violated or not.

 7 And that standard would be applied to the facts that the

 8 industry would have given us and that we would have
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 9 responded to. If we were not able to reach an agreement

10 with the industry, that would be submitted to an

11 administrative law judge.

12 It's fair, because it limits the record to the

13 pertinent facts. What the proposals before you would do

14 would be to change that. So it would change the hearing

15 into an inquiry into things that would not be relevant to

16 the violations that these proposed amendments would be

17 looking at. For example, they would like to show

18 violation of the emissions standards to be able to bring

19 in again this information, the full panoply of testing

20 that they would be able to do to a host of vehicles to

21 bring that into the hearing. When the real issue in that

22 hearing is not whether emissions standards have been

23 violated, but merely whether the four percent failure rate

24 has been violated or not. It just doesn't make any sense

25 to allow that kind of a showing to be made there. And

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 1 that's why the hearing procedures are very clear that

 2 that's not permissible.

 3 EXECUTIVE OFFICER WITHERSPOON: We're restating

 4 the case, which you wanted to avoid about going back on

 5 emissions testing loop.

 6 On the question of Executive Officer discretion,

 7 these clauses make their way into a number of our
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 8 regulations. And there are specific conditions given to

 9 us by the Office of Administrative Law and the

10 Administrative Procedures Act about how well they must be

11 defined such that I am not making arbitrary decisions with

12 no indication to the regulated parties on what my decision

13 will be based.

14 And I have told staff time and time again do not

15 leave me without parameters and criteria to evaluate

16 petitions that come before me, because I do not want to be

17 in the place that this Board should be in of evaluating

18 broad issues. And if we find ourselves with so many

19 petitions that there's something wrong in the underlying

20 rule, the appropriate remedy is for us to bring the rule

21 back to you.

22 So in this instance and in every other reg, we

23 scrutinize -- and Mr. Jennings can speak to this as well.

24 We have attempted to lay out -- it doesn't matter how many

25 times the rule speaks to Executive Officer discretion.

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 1 What really matters is when that discretion is exercised,

 2 what is it that I'm looking at, and how much play is in

 3 those criteria. As Mr. Oliver just indicated, there's

 4 very little play. It's a very straight forward public

 5 record. It's well understood by all the parties. I'm not

 6 exercising a wide range of discretion. The auto industry
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 7 would like me to exercise more and to have the judge

 8 exercise more. I am not comfortable with that. And

 9 you've heard the reasons why our legal staff believes that

10 would undercut the purpose of this rulemaking itself.

11 And, Mr. Jennings, did you want to add to my

12 comments about executive discretion?

13 CHIEF COUNSEL JENNINGS: Yes. I would just

14 confirm that there are, indeed, many instances where the

15 Executive Officer's discretion comes into play. We always

16 need to identify sufficient standards for exercise of that

17 discretion so that it's not unfettered. OAL is going to

18 review that befor these regulations become effective. And

19 as well as those criteria are met, there's no need for a

20 separate administrative hearing before the decision is

21 made. The opponents, if they feel a discretion has been

22 abused, have the option of going to court.

23 MR. OLIVER: Right. The important thing to

24 remember in all of this is all of these arguments that are

25 advanced here are arguments that can and will be made in a

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 1 court challenge if one is made to one of these things.

 2 We're just saying for the purposes of an administrative

 3 hearing, we're narrowing the facts to what the facts that

 4 are pertinent to the violation that the regulatory

 5 standard establishes and nothing else.
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 6 MR. MARTINO: May I respond briefly on that?

 7 CHAIRPERSON SAWYER: Briefly, please.

 8 MR. MARTINO: Very briefly, the problem here is

 9 not as the Executive Officer was suggesting that the

10 discretion is so broad that it would be impossible

11 essentially for a decision maker to know how to proceed.

12 And, therefore, they're being given unbounded discretion.

13 The problem is that the decision maker is given complete

14 discretion, and then the evidence that can be presented at

15 the hearing is limited essentially to entirely one sided

16 lopsided pro-prosecution evidence. That's the violation

17 of due process.

18 SENIOR STAFF COUNSEL OLIVER: We would respond in

19 this manner. The process of collecting the information

20 through the warrantee claims procedures in the proposal

21 before you give the manufacturers ample opportunity to,

22 say, present their side of the story about the cause of

23 the defects, the cause of the failures, and allows them

24 certain defenses to take out certain failures that have

25 occurred because of a variety of different circumstances.

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 1 And those are the things that will be played out at the

 2 hearing based on the record that the manufacturers

 3 themselves develop.

 4 CHAIRPERSON SAWYER: Thank you.
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 5 Mr. Cabaniss.

 6 MR. CABANISS: Afternoon. My name is John

 7 Cabaniss. I'm with the Association of International

 8 Automobile Manufacturers.

 9 AIM supports the goals as well that ARB staff has

10 set forth for this rulemaking to reduce burdens, to ease

11 ARB's burden of proof for corrective actions, and to

12 facilitate prompt corrective actions when they're needed.

13 The staff proposal has a number of streamlined

14 elements which we support, which you've heard about today

15 and I won't go over again. We also share some of the same

16 legal concerns that you've already heard brought up again.

17 I won't go over those in any detail except to point out

18 that failing emissions standards is and should remain the

19 basis for corrective actions as it has been for the last

20 30-plus years under the California and also the federal

21 vehicle emissions program. I don't think it's fair in any

22 sense to ignore emission impacts entirely.

23 And also we would agree about the fact that the

24 authority on corrective actions is limited to recalls.

25 However, we believe that extended warrantees are

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 1 appropriate in many cases, and they should be maintained

 2 as an option under the regulation. And I don't think

 3 there's anyone's suggestion that they shouldn't be at
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 4 least an option.

 5 Regarding emissions and impact or standards, I

 6 don't believe it's necessary to go so far as to throw the

 7 baby out with the bath water entirely. I think there

 8 should be a way to strike a fair balance for both ARB and

 9 manufacturers. One idea I had -- and I have not had a

10 chance to vet this very much within the industry or with

11 staff. And I apologize for that. But rather than

12 eliminating emissions levels entirely from consideration,

13 I think it would be fair to allow manufacturers the option

14 to conduct engineering analyses, analyze available data

15 from development programs and other testing, and also to

16 conduct new testing if they deemed it appropriate between

17 the times of the four percent EWIR report and the 10

18 percent trigger level for the SEWIR report.

19 That's obviously going to be a period of time of

20 months and perhaps even years where there's ample time for

21 manufacturers and staff to work together to look at

22 emissions levels and the impact that they have to weigh

23 the undue burden and at least to discuss it. By the time

24 you get to a ten percent action level, we would have

25 resolved how to proceed, if at all. And there would be no

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 1 delay in the corrective action, which is again one of the

 2 goals set forth in the rule.
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 3 Most manufacturers are, of course --

 4 CHAIRPERSON SAWYER: I must ask you to conclude,

 5 please.

 6 MR. CABANISS: Of course, the hearing information

 7 would have to be adjusted accordingly as well. I believe

 8 that most manufacturers are conscientious in tracking

 9 their warrantee claims, emissions, and otherwise. And in

10 most cases, they will take actions well before these

11 trigger levels are hit for consumer reasons. However, I

12 believe it is very important and necessary for

13 manufacturers to have an option such as that described

14 when occasion is warranted. Thank you.

15 CHAIRPERSON SAWYER: Thank you.

16 Ms. Amette.

17 MS. AMETTE: Hello. I'm Pamela Amette with the

18 Motorcycle Industry Council. And I'll briefly summarize

19 the more detailed comments that we submitted in writing

20 here today.

21 While the March 9th proposal has revised wording,

22 the proposal remains basically the same and does not

23 adequately address the four main issues that MIC has

24 consistently raised. Three of these issues have been

25 adequately covered by the Alliance. And that is, number

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 1 one, the unfeasible requirement to submit a compliance
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 2 statement at the time of certification that an excess

 3 defect failure rate will not occur over the full useful

 4 life and that test procedures are violated if an excessive

 5 defect rate is experienced by in-use vehicles.

 6 The second is the failure to allow manufacturers

 7 to show that a defect does not cause vehicles or engines

 8 to exceed emission standards.

 9 And the third is the unfair and legally

10 unsupportable public hearing provisions.

11 The fourth issue for the MIC is the failure to

12 recognize the special circumstances affecting motorcycles.

13 Section 2171 makes recall mandatory for all types of

14 component failures in non-OBD vehicles such as

15 motorcycles. Whereas, under Section 2170, OBD vehicles

16 are subject to corrective action other than recall such as

17 extended warrantees for non-exhaust aftertreatment device

18 defects. This treatment does not give proper recognition

19 to the fact that motorcycles are certified to the full

20 useful life and therefore come with extended emission

21 warrantees.

22 While the Executive Officer has the sole

23 discretion to waive corrective action for vehicles

24 warranted for their full useful life, there are no

25 standards to guide the EO's discretion for granting such

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 1 waivers. MIC is concerned that the discretionary waiver

 2 will be granted in an unpredictable manner or may never be

 3 granted.

 4 MIC therefore requests that its earlier proposal

 5 for a separate section dealing with defective components

 6 on motorcycles be included. The MIC proposal contains

 7 specific grounds for waiving corrective action, including

 8 the opportunity to conduct emission testing that

 9 demonstrates a defect does not cause certification

10 standards to be exceeded.

11 In conclusion, MIC requests the Board not adopt

12 the March 9th regulatory proposal so that further

13 substantive revisions can be developed through cooperative

14 work between the staff and the industry stakeholders.

15 Any questions?

16 CHAIRPERSON SAWYER: Thank you.

17 Mr. Gault. And then Aaron Lowe, Allen

18 Pennebaker, and Zarkis Martirosian.

19 MR. GAULT: Good afternoon. I'm Roger Gault, the

20 Technical Director of the Engine Manufacturers

21 Association.

22 As you know from our comments last December, the

23 heavy-duty engine industry had substantial concerns about

24 the staff's proposal. While some minor improvements have

25 been proposed, other aspects of the rule have been made

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 149

 1 worse. Overall, we think today's proposal was

 2 fundamentally flawed because, among other reasons, it

 3 adopts new standards and test procedures without providing

 4 the required lead time and period of stability.

 5 It imposes unauthorized and unfair certification

 6 obligations on manufacturers.

 7 It fails to recognize that a warranted part could

 8 have warrantee claims on separate assemblies or functions

 9 which, if aggregated, could trigger systemic failure with

10 no failure actually existing or cure being available.

11 It imposes unauthorized and inappropriate 435,000

12 mile extended warrantee periods for heavy-duty diesel

13 engines. That is, heavy, heavy-duty diesel engines.

14 Fails to recognize in 2010 the heavy-duty engine

15 manufacturers face a unique burden of NOx after-treatment

16 standards and OBD technology implementation. And it

17 proposes an unfair adjudicatory process in which every

18 effort is made to preclude the manufacturer from having a

19 fair and reasonable opportunity to challenge staff's

20 action. The proposed changes to the rule have moved far

21 beyond the statutory basis which to is protect against

22 excess emissions which resulted from defective parts. The

23 Board should reject the staff's proposed changes.

24 If you have any questions, I'd be pleased to

25 answer them.
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 1 CHAIRPERSON SAWYER: Thank you very much.

 2 Mr. Lowe.

 3 MR. LOWE: Thank you. My name is Aaron Lowe.

 4 I'm with the Automotive Aftermarket Industry Association.

 5 I'm here to represent the independent

 6 aftermarket. And today, you'll hear from several

 7 independent shops that will dispute the statements by

 8 staff this provision of extending the warrantees will have

 9 a minimal impact on their businesses.

10 I want to cover three issues though. One issue

11 is no one has really talked about the fact that this

12 statute does not support the Board's authority to extend

13 the warrantees beyond the three years/50,000 miles or

14 seven years/70,000 miles. While it is true that 43105

15 does provide them the discretion to provide for corrective

16 action, 43201 provides -- 43205 establishes a warrantee.

17 So the warrantee is set at 3/50 and 7/70 in statute.

18 While they have discretion, you can't ignore where the

19 stated authority for a warrantee doesn't give them an

20 authority to go beyond that or to set the warrantee at any

21 other number. So we don't understand, and we have never

22 seen an explanation of why they feel they have the

23 authority to move beyond the statutory authority numbers.

24 Second of all, while it's true the RAND study

25 that's quoted by Mr. Cackette did state there would be
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 1 other business, the number for the aftermarket -- the

 2 business was 1.3 billion from the aftermarket to the new

 3 car dealers. It does say under warrantee if they know

 4 about it, consumers know about it, 60 percent of them will

 5 go to the new car dealer to get the warrantee repair.

 6 Absent that warrantee, 37 will go for the first eleven

 7 years. And after that, only 11 percent will go to new car

 8 dealers. So there is a huge impact to our shift of

 9 business because of this warrantee.

10 Then I want to briefly touch on the fact that

11 they say they don't have the authority to allow

12 independents to do warrantee work. Our proposal says that

13 after the initial statutory warrantee that they could

14 go -- they would allow independents to do the work to

15 correct that part defect and then to invoice the new car

16 manufacturer. There is nothing in CARB statute that we've

17 been able to find that would prohibit CARB from

18 determining who can do warrantee work. In fact, CARB

19 already regulates the fact that all new car dealers have

20 to have the parts to do the warrantee work. Even if CARB

21 had the authority or did have some limitation on the

22 warrantee work, they feel confident they can go beyond the

23 statute to increase the warrantee. So we're not sure why

24 they don't feel they have the authority to provide who can
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25 do the warrantee work.

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 1 And fourth, it says in Section 203(a)(d) in Title

 2 13 of the Code of Regulations that if a part is not

 3 available for a warrantee repair within 30 days that that

 4 repair can be done or performed by anybody by any service

 5 establishment. So, in fact, CARB already provides in

 6 their regulations for others to do warrantee work. So we

 7 don't see where there's any prohibition or any limitation

 8 on allowing the aftermarket to do warrantee work.

 9 CHAIRPERSON SAWYER: I must ask you to conclude.

10 MR. LOWE: I'm concluding.

11 And we just want to state we would like to see

12 that warrantee provision taken out -- the extended

13 warrantee provision taken out of this regulation. We are

14 all four supporting the car companies standing by their

15 components. We don't think they should drive businesses

16 away from our businesses. Thank you.

17 CHAIRPERSON SAWYER: Professor Sperling.

18 BOARD MEMBER SPERLING: Can we hear from staff

19 why they made the assertion that there's no legal

20 authority to allow the aftermarket shops to do those

21 repairs?

22 SENIOR STAFF COUNSEL OLIVER: The statute

23 establishes the statutory warrantee periods that are
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24 applicable to manufacturers. And the statute does not

25 mention the aftermarket industry. It has no mention of

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 1 our ability to shift that burden from the manufacturers to

 2 the aftermarket industry. There is a provision in

 3 regulations that provides that if in the event that

 4 manufacturers do not have the necessary parts to do

 5 warrantee repairs that a customer on their own choice can

 6 go and get those repairs done. But that's as an

 7 accommodation to the customer. We would not be able at

 8 this rulemaking to say that anyone could go out with a

 9 defective part and get it repaired anywhere they wished

10 and submit the bill to the original automotive

11 manufacturer. That's just not authorized by the statutes.

12 And I can't read you a particulate code section

13 that prohibits it. But the way the law works is unless it

14 provides us the authority, we don't have it. That's our

15 read on the situation.

16 BOARD MEMBER SPERLING: Is it possible for -- I'm

17 not familiar with these circumstances. Is it possible for

18 ARB to facilitate some kind of discussion between the OEMs

19 and this aftermarket industry to kind of try to come to

20 some resolution?

21 SENIOR STAFF COUNSEL OLIVER: We've supported

22 those kinds of -- Tom Cackette has that.
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23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We did

24 have some discussions in the past, and there was some

25 anticipated legislation, not on our part, but by the

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 1 independent repair industries maybe a decade or more ago.

 2 But I can tell you that the discussion was much sharper

 3 than what you're hearing today. The auto industry was

 4 just adamantly, "We see no way that we're going to enter

 5 into any agreements with independents to pay them to

 6 repair cars." And it's both a business I think decision

 7 as well as lack of control. And the independent repair

 8 industry said, "We do a great job and take care of it."

 9 But I don't see any middle ground. And I don't think we

10 can put ourselves in the middle of being a broker of that

11 kind of fight which is basically an economic issue who

12 gets the work.

13 EXECUTIVE OFFICER WITHERSPOON: What has happened

14 in California is legislation has passed requiring auto

15 manufacturers to share the codes on how a car can be

16 fixed. And this Board has adopted regulations indicating

17 about the provision of aftermarket service information to

18 third parties so they can compete on an even playing

19 field. But with respect to when we're ordering repairs,

20 that burden is on the manufacturers and only if they

21 choose to or a consumer's inconvenience ends up in other
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22 shop.

23 BOARD MEMBER SPERLING: Thank you.

24 CHAIRPERSON SAWYER: Thank you.

25 Mr. Pennebaker.

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 1 MR. PENNEBAKER: Good afternoon. My name is

 2 Allen Pennebaker. I'm the owner of Orinda Motors in

 3 Orinda, California. I've been in this business for 35

 4 years. I'm also Vice President of the Automotive Service

 5 Councils of California, or ASCCA, the largest and oldest

 6 association that represents the independent repair

 7 industry, in fact, since 1940.

 8 I'll make a couple of points. We fully agree

 9 with Mr. Lowe and the others here that the Board does not

10 have the statutory authority to impose these extended

11 warrantees, nor do they have the serious scientific data

12 to support that it will impact air quality. The Air

13 Resources Board has not fulfilled their legal obligations

14 to consider the impact on small businesses in California.

15 In fact, it's practically impossible for the same small

16 businesses to even give their input through testimony.

17 Apparently, the Air Resources Board staff has

18 stated these extended warrantees will have minimal impact.

19 There's ample testimony available that these extended

20 warrantee and recall regulations will and have seriously
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21 impacted both the consumer and the industry. In fact, in

22 one month, we've collected over 500 signatures from shop

23 owners stating exactly that it does seriously impact their

24 businesses.

25 The Board also has apparently not considered a

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 1 considerable impact to the California consumer. As

 2 everyone knows, manufacturers will add the cost of any

 3 extended warrantee to the cost of new cars. Worse, this

 4 type of targeted or limited expended warrantee makes it

 5 practically impossible for a consumer to know what to do.

 6 The check engine light comes on, is it a warrantee item or

 7 not? Given the reality of this particulate set of

 8 regulations, it will be absolutely impossible for any

 9 state agency or manufacturer to make clear to the

10 California consumer what their choices are and why. So it

11 automatically leads to many confused consumers spending

12 extra money and inconvenience, as well as losing their

13 choice when the check engine light does come on.

14 The majority of California consumers choose to

15 have the repairs done outside the new car dealer network.

16 These regulations force them to go where they normally

17 choose not to, or at least it makes it much more difficult

18 for them to exercise the simple right of choice. It's the

19 view of some that the Air Resources Board or at least the
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20 staff has taken the approach that they will keep adding

21 regulations and agreements that will keep pushing things

22 toward lifetime warrantees on all vehicles. By doing this

23 piecemeal, they are avoiding having to conscientiously

24 address the very real impacts on the independent industry.

25 The existence of that industry is what gives California

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 1 consumers a competitive choice in their automotive

 2 repairs.

 3 The fact that the Air Resources Board already

 4 reduces some recall requirements to extended warrantees

 5 which is apparently with a questionable practice with

 6 current rules and laws hardly justifies making it a

 7 regulation. Especially considering there is no evidence

 8 that it actually does anything to clean the air.

 9 ASCCA members and the rest of the independent

10 repair industry are California citizens, California

11 consumers, breathers of California air, and whole heartily

12 support the goal of cleaner air. We just want to be part

13 of making that happen. Thank you.

14 CHAIRPERSON SAWYER: Thank you.

15 Mr. Martirosian, and then we will have Glenn

16 Davis, Bud Rice, and Jim O'Neil.

17 MR. MARTIROSIAN: My name is Zarkis Martirosian,

18 and I'm your friend. I'm not here to beat you up and all
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19 this.

20 I'm a shop owner in Fresno. I represent Chapter

21 25 of the ASC. There's 60 shops there. And I also

22 represent people that have no faces. People that don't

23 come up here. People that don't talk to you. And these

24 are young couples that can't buy a home. Old people can't

25 buy their medication. And what's happened over the years

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 1 is we're stuck with methods. We're not looking for

 2 solutions. We're looking for methods. That's all I've

 3 seen are beautiful pictures up there about how we can

 4 solve it. But they don't solve problems. I see cars that

 5 come in here into our shop that should be junked under the

 6 CAP program, which is a total joke. But yet we want to

 7 please the consumers, so we give them $500 to fix their

 8 cars. Now we're talking about upping that to $1,000.

 9 Those are your polluters.

10 Why can't they afford a car? Because they're too

11 busy paying fees for all of these agencies that keep

12 coming over here, because it's become not to clean the

13 air. It's a religion. And you're so passionate at what

14 you do and we're fighting businesses that we already

15 kicked out of the state that can't afford to be here in

16 this state, and it's not about cleaning air. And I'm sure

17 there's a few that want to make money.
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18 But I have 52 people out of the 12 employees that

19 I have that I have to make decisions for, whether I buy

20 the insurance for their families or whether not. And

21 every time you guys sit here and dick around about this

22 and that, that's just money taken out of my pocket to pay.

23 I still pay for the employees' medical and their dental.

24 And, yes, this will effect it.

25 I look at this whole thing as an earthquake. And

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 1 the earthquake came in the form of environment. And all

 2 the people around come out, and they have all these little

 3 aftershocks, you know, your Green Peace and everyone, all

 4 these other agencies. And they'll want to be in this pie.

 5 But they all forget the money comes from people. And

 6 eventually we're going to run out of money.

 7 They're not fixing the solution. All we're doing

 8 is bickering about it. You have the things in place. I'm

 9 a CAP station. I am a smog station. You can set up a

10 warrantee situation with these guys, have it three

11 years/50,000. If the people want to pay for seven years,

12 let them pay.

13 But if you really want to clear up air, then

14 check the cars every year, not every two years or give six

15 years on new cars. We have customers that are

16 salespeople, 100,000 miles. You don't think they pollute?
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17 Plus look at who made the part. Is it USA or China? Is

18 it Japan? Is it Indonesia? Wagner just left the state.

19 The last drum was done in February. We're chasing our

20 manufacturers out of the state.

21 CHAIRPERSON SAWYER: Please conclude.

22 MR. MARTIROSIAN: All I'm saying is stop looking

23 at the method. Get serious about the solution.

24 None of you have worked in the field in the

25 trenches. You just sit and you make laws, and you have no

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 1 idea how it affects us. Maybe it's time to sit down with

 2 the shop owner, with the people that see what happens,

 3 that we balance the budget for the consumer. How high our

 4 prices go. This is what needs to be started to consider

 5 is that this monster is getting too big. And it's

 6 gobbling up every resource. That's why we're in trouble

 7 in this state, and you're going to chase out the

 8 businesses because they don't have to be here.

 9 CHAIRPERSON SAWYER: Thank you.

10 Mr. Davis.

11 MR. DAVIS: Chairman Sawyer, members of the

12 Board, thank you for allowing us this time this morning --

13 or this afternoon. My name is Glenn Davis from GDA

14 Enterprises. I'm an independent garage owner from Upland,

15 California. I'm also on the Executive Committee for the
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16 Automotive Service Council of California representing over

17 1500 independent service providers in this state.

18 I have a couple of points to make. In Mr.

19 Valencia's -- during the February workshop, Mr. Valencia

20 admitted that staff had not, in fact, mitigated damages to

21 our independent service providers. As a shop owner who

22 has spent hundreds of thousands of dollars in equipment

23 and tens of thousands of man hours in advanced training,

24 we are experts at diagnosing and repairing emissions

25 control equipment in the state of California. The

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 1 diagnosing and repairing of this emissions control

 2 equipment represents about 30 percent of the revenue that

 3 is generated in my shop. These proposals become adopted,

 4 I will lay off employees. We will not have the workload

 5 available to support the current employee load.

 6 Secondly, I believe that these proposals will

 7 create an unfair competitive advantage to the dealership

 8 network. The dealership technician typically -- and we

 9 use this based on anecdotal evidence on the international

10 automotive technicians network generally receive about 30

11 percent of the retail compensation by the manufacturers

12 for handling emissions control or warrantee requirements

13 at the dealership level. In order to maximize -- and

14 those technicians, God bless them. They have families
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15 too, and they need to support their lifestyles. They need

16 to maximize the dollars that are generated in that bay.

17 They're going to find problems that may or may not exist

18 on that car on top of whatever warrantee that they're

19 trained to fix.

20 Case in point, I have a 2003 Nissan Sentra in my

21 shop right now owned by a single mother. It's got 58,000

22 miles on it. The check engine has been on for almost

23 eight months. The car has a history of stalling and

24 leaving her stranded on the freeway. The code represented

25 by that check engine light is a PO605 which has to do with

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 1 an internal computer problem having to do with the

 2 read-only memory. That problem needs to be addressed by

 3 replacing the computer and reflashing the vehicle's

 4 emissions system. So far, through several visits to the

 5 dealership, she has been sold spark plugs, fuel injection

 6 services, and ignition coils in excess of over $1,000,

 7 when her initial complaint has never been addressed. The

 8 environment for fraud is going to run ramped if all of

 9 these cars are directed towards the dealership network.

10 And, finally, Mr. Oliver at the February meeting

11 stated that these new proposal regulations will result in

12 an insignificant reduction of emissions. He also stated

13 that the reason for the proposal is to gather the data for
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14 the pattern failures --

15 CHAIRPERSON SAWYER: Please conclude.

16 MR. DAVIS: As a smog technician, as a

17 representative of the industry, I would propose that

18 instead of exempting the cars for the first six years when

19 they come from the dealership that you allow the smog

20 check stations to test those cars, fail those cars.

21 You'll have your emissions reduction data. You'll have

22 your pattern failure data, and you won't need this undue

23 regulation. Thank you for your time.

24 CHAIRPERSON SAWYER: Thank you.

25 Mr. Rice.

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 1 MR. RICE: Hi. Good afternoon. My name is Bud

 2 Rice. I'm with Quality Tune-Up Shops. I rise in

 3 opposition to the proposal for a variety of reasons, many

 4 of which have been or will be articulated by others in the

 5 industry and other groups. But my reason for addressing

 6 the Board is to put a face on the likely impact this

 7 proposal will have on small businesses.

 8 I've owned this businesses since 1976. And we

 9 sell and service services and products to our customers.

10 And we've been doing it for a long time. And I believe

11 it's a valuable service to our customers.

12 This proposal will have the unintended impact of
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13 moving service items that are handled by the aftermarket

14 back to the vehicle manufacturers, as many people have

15 already stated. Car comes back to the dealer under

16 warrantee or under a recall, they will in all likelihood

17 be asked to purchase other items based on mileage or

18 visible signs of wear. The truth of the matter is those

19 vehicles would not have been there without this proposal,

20 and the free market would have been addressing those

21 concerns. This impact will be significant. And I ask the

22 Committee the consider this during their decision making

23 process.

24 One thing that's interesting is back when the

25 Smog Check II things were happening, CARB was making a

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 1 proposal -- and I remember Mr. Cackette doing the road

 2 shows, and I attended some of his sessions when it was

 3 represented to us 15 percent of the vehicles would be

 4 moved over to test-only. And so don't worry about it,

 5 Bud. It will be okay. Just 15 percent. That number

 6 moved to 36 percent. It's okay, Bud. Don't worry about

 7 it. It will be okay. Today, I stand in front of you

 8 saying that 80 percent of the vehicles that I used to test

 9 are now over at the test-only guy. Should I worry about

10 it now? Okay. Should I worry about it now?

11 Well, it was said this morning the RAND study
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12 said just a little insignificant amount of impact by the

13 aftermarket will be moved back to the manufacturers.

14 Well, I'm going to tell you, I'm going to worry about it

15 right now. I'm not going to wait around and be thinking

16 it will be all right. It's not going to be all right.

17 The impact will be significant.

18 So again, I ask you that the decisions have

19 consequences and sometimes they have unintended

20 consequences. Thank you.

21 CHAIRPERSON SAWYER: Thank you.

22 Mr. O'Neil, and then we'll have Larry Nobriga,

23 Paul Frech, and Norman Plotkin.

24 MR. O'NEIL: Good afternoon, members of the Board

25 and staff. My name is James O'Neil, and I own and operate

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 1 Chino Auto Tech in Chino, California. We've been in

 2 business for 20 years. I've been a licensed smog

 3 technician in the state of California since 1967 when

 4 exhaust emission regulations were first passed for import

 5 vehicles. I worked for Volkswagon at the time. So I

 6 consider myself a true environmentalist.

 7 With these two hands, I have fixed thousands of

 8 cars over the years and restored them to clean running.

 9 And I promote generally any regulations that help us to do

10 this. I was part of the SB 1146 in-service information
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11 fight on behalf of industry a few years ago.

12 I just think the RAND study has got it wrong. I

13 don't know what factors they're looking at. But I think

14 they're ignoring some of the things that are commonplace

15 in the auto repair shop. First of all, our customers come

16 to us at 10,000 miles, 15,000 miles, 30,000 miles. They

17 don't return to the dealer. They come to us because we

18 clear up the confusion in their minds over automobile

19 service. We pull up the correct service for them, tell

20 them what's required. If an emissions warrantee issue or

21 any other warrantee issue comes up, because we check

22 technical service bulletins on every car, we refer them to

23 the dealer, or sometimes we'll take the car to the dealer

24 ourselves.

25 The point I wanted to make today is some of the

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 1 problems that I've run into lately in doing that is one

 2 manufacturer whose light trucks were subject to an

 3 extended warrantee of 200,000 miles for fuel injection

 4 problems. And we had a cooperative nearby dealer, and we

 5 would take the cars over there whenever they had misfires

 6 and showed the characteristics of a plug pop, which was

 7 what the problem was. We were doing that for about

 8 two years. And then all of a sudden, we sent three cars

 9 over there total and were called back, and all three cars
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10 needed valve jobs. One had 60,000. Another had about

11 80,000. Another was up in the 100,000 ranges. We thanked

12 them, paid their fee for the diagnosis, took the car back,

13 sent it to another dealer, and they were fixed under the

14 200,0000 mile warrantee, as they should have been in the

15 first place, by replacing the injector pop or cleaning the

16 system.

17 So as my colleagues have stated, the final fix

18 and the best solution is not always the dealer on these

19 problems. There are those of us in the aftermarket with a

20 great deal of experience, more experience than the average

21 dealership technician who can handle these problems in

22 some way.

23 '92 to '95, this same manufacturer of light

24 trucks had another problem with fuel injectors, and they

25 issued a -- I'm not sure whether to call it a recall or

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 1 not. But what they did do was reimbursed the consumer if

 2 they had that part replaced. And so my consumers, my

 3 regular customers were coming to me, and I would supply

 4 them with copies of the repair order from my computer, and

 5 they were able to obtain reimbursement. So that's another

 6 thing that might be considered.

 7 Appreciate your time today. Thank you.

 8 CHAIRPERSON SAWYER: Thank you.
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 9 Mr. Nobriga.

10 MR. NOBRIGA: Good afternoon, Dr. Sawyer and

11 members of the Board. My name is Larry Nobriga. I have

12 automotive -- I'm with Automotive Service Councils of

13 California. I am a chapter representative with them. I

14 also have an automotive service in San Leandro.

15 I have been a smog tech. I have been a shop

16 owner. I've been a smog instructor, a bunch of different

17 things. This proposal will hurt my business. And I have

18 on more than one occasion my customers go out and they buy

19 new cars. They disappear off the face of the earth for

20 two or three years until they perceive their warrantee has

21 run out and they no longer have to go to the dealer.

22 If we send them to the dealer because they failed

23 a smog check, if we send them to the dealer, they never

24 get out with whatever needs to be repaired under

25 warrantee. There are always add-ons. And I understand

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 1 that. Everybody needs to make a profit. And,

 2 unfortunately, a dealer cannot profit on warrantee work

 3 alone. But when one of my customers came to me at about

 4 90,000 miles after extended service policy had run out, at

 5 105 when I was looking at the interval for changing a

 6 timing belt, it had already been done twice, once at 50,

 7 once at 75 by the dealer who brought their service
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 8 recommendations way forward from what their book said was

 9 required. It cost her thousands of dollars in automobile

10 service that she did not need. Kind of went ballistic

11 when she found that out. But I understand where the

12 dealer is coming from.

13 This proposal is not going to clean our air. I

14 work hard at cleaning my air. I won't know if I'm helping

15 myself or not. But maybe I'll save some of the air for my

16 grandchildren. That's very important.

17 This proposal does not do that. They have better

18 ways. Let's get rid of the six-year new car exemption.

19 We know that we're going on cut points for gasoline

20 vehicles from 45 to 5,000. That will make a big

21 difference in what is happening from an emissions

22 standpoint. That's where we need to be. We need to fail

23 the cars early. That's what will show you the pattern

24 failures and actually help everybody involved, including

25 my grandchildren. They're important to me. Thank you.

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 1 BOARD MEMBER RIORDAN: Thank you, Mr. Nobriga.

 2 Next is Mr. Frech. Come forward, please.

 3 MR. FRECH: Good afternoon. My name is Paul

 4 Frech. I'm President of the Automotive Trade

 5 Organizations of California; past president and current

 6 newsletter of the Automotive Service Councils of
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 7 California, Orange Coast Chapter; Executive Board member

 8 of California Automotive Business Coalition; and an

 9 original member of the Bureau Advisory Group to the Chief

10 of the Bureau of Automotive Repair.

11 Believe it or not, I actually do own a shop and

12 run one, in spite of all those things, for the last 40

13 years. It's a mom and pop type operation, local

14 neighborhood shop, independent. The 15 year/150,000 mile

15 warrantee proposal unfortunately I think is an example of

16 the road to clean air is paved with the best of intentions

17 but may be a bad decision.

18 Let me explain. In the '60s, '70s, and '80s, we

19 serviced and repaired only two brands of cars, Volkswagons

20 and Audis. The bad news was that in the '70s and early

21 '80s the sales of Volkswagons were going downhill. But

22 the good news was Audi sales were going up. As luck would

23 have it, a program called 60 Minutes aired a show that

24 purported to show Audis have unintended acceleration. As

25 you all know, if you remember history, Audi was completely

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 1 exonerated and cleared of any wrongdoing. But,

 2 unfortunately, that program damaged them severely, and

 3 their sales plummeted. Audi fought back by bringing on

 4 new models and renaming all their cars. But the one thing

 5 they did that brought my business to its knees was to
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 6 offer a limited ten-year, 100,000 mile warrantee for the

 7 power train.

 8 As you heard earlier, normally we expect to lose

 9 people that buy new cars for three years at the

10 dealership. After that, the regular warrantee runs out

11 and we get to see them and make them happy.

12 But when Audi went to that long extended

13 warrantee, we lost another seven years of work. So

14 Volkswagon sales went down. Audi sales were off limits to

15 us. So a lot of our Audi customers, of course, kept their

16 car, didn't trade them, bought new ones. And when they

17 came in for service on the old car, we quarried them how

18 come we're not getting the service on the car now it's

19 five years old. They said, "You don't understand. We

20 have this ten-year warrantee. The dealer says if we don't

21 go to them, if we miss a service," somebody indicated

22 earlier, "they'll ruin our warrantee." One of your staff

23 members mentioned that if they go 10,001 miles past an oil

24 change, your warrantee is over. The same process is going

25 through our customers' minds.

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 1 We tried to explain to them that anybody could

 2 repair their cars if they were qualified. Many asked if

 3 we were willing to go to court with them and fight Audi on

 4 these matters. Unfortunately for us, we couldn't afford
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 5 to do that. So a business decision had to be made by me.

 6 We abandoned all hopes of getting Audi service and repair

 7 work and looked to other German makes that we were

 8 compatible with. With a major investment in tools,

 9 training, parts and information --

10 CHAIRPERSON SAWYER: Please conclude.

11 MR. FRECH: Thank you. We took on BMV, Porche,

12 and Mercedes. The 15 year/150,000 mile warrantee will

13 kill the entire aftermarket. Unlike my predicament with

14 Audi, there are no other cars to work on. And we'll never

15 survive for 15 years without that work.

16 CHAIRPERSON SAWYER: Thank you.

17 Mr. Plotkin, and then we'll have Vaughn Burns,

18 Philip Fornier, and Doug Korthof.

19 MR. PLOTKIN: Thank you, Mr. Chairman, Board

20 members. Norman Plotkin representing the California

21 Automotive Wholesalers Association.

22 Let me just begin by saying we support the effort

23 of more durable parts and lower emissions through more

24 durable parts. I would just let you all know that we

25 believe that well maintained vehicles by the aftermarket

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 1 will lead to lower tailpipe emissions. That's part of the

 2 solution.

 3 Let me make one point with respect to this
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 4 proposed regulation. Of course, I could go into the

 5 economic impact that's been fairly glossed over. We've

 6 pointed to the RAND study that is as much as $1.3 billion

 7 impact to the aftermarket. And the Penway study that

 8 pegged it at $8 billion. And you could take exception

 9 with those numbers, to which I would say if you want to

10 conduct an independent study, please, by all means, before

11 you move forward.

12 I can also point to the fact that there's no

13 nexus between an extended warrantee and more durability.

14 And there's no nexus between extended warrantee and lower

15 tailpipe emissions. But let me make one point. The plain

16 language of the statute that authorizes recall and

17 warrantee is ambigious. I made that point in Bakersfield

18 and let me make it again here. It's ambigious. Health

19 and Safety Code Section 43205 articulates that the

20 warrantee period will be three years or 50,000 miles or

21 seven years/70,000 miles for more expensive parts.

22 Staff relies on Health and Safely Code Section

23 43105 that suggests, if I may be permitted to read for a

24 moment, "The procedures for determining and the facts

25 constituting compliance or failure of compliance shall be

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 1 established by the Board." That seems to be a generally

 2 broad grant of authority. But I would submit it flies in
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 3 the face of a particular enumeration of the years and/or

 4 miles that the Legislature determined should be the

 5 appropriate warrantee period for emissions parts.

 6 With that said, we have proposed a compromise.

 7 And that is: Allow us, the aftermarket, to perform the

 8 warrantee work so that we don't suffer economic harm in

 9 the drive for more durable parts. To which the answer

10 comes, we don't have the authority. But I would just

11 counter with 43105 of the Health and Safely Code that

12 establishes that the procedures for determining and the

13 facts constituting compliance or failure of compliance

14 shall be established by the State Board and assert that

15 therein lies your authority. If you are going to exceed

16 the authority given you for three/50, seven/70, by all

17 means, please avoid the economic harm to the aftermarket

18 by allowing us to do this work using the same broad

19 authority in 43105 of the Health and Safely Code to allow

20 us to do this work. Thank you.

21 CHAIRPERSON SAWYER: Thank you.

22 Ms. Berg.

23 BOARD MEMBER BERG: I just have one quick

24 question. What is the size of the independent

25 aftermarket?

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 1 MR. PLOTKIN: I can't quantify that for you.
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 2 BOARD MEMBER BERG: You're saying you could be

 3 losing 1.3 billion to 8 billion. I just wondered what the

 4 size of the market was.

 5 MR. PLOTKIN: In our written testimony, we've

 6 estimated a $35 billion impact to the California economy.

 7 BOARD MEMBER BERG: 35 million?

 8 MR. PLOTKIN: Billion.

 9 BOARD MEMBER BERG: But you don't know what the

10 size of the market is?

11 MR. PLOTKIN: That's the size of the market.

12 BOARD MEMBER BERG: That's the size of the

13 market, 35 billion?

14 MR. PLOTKIN: Yes.

15 BOARD MEMBER BERG: Thank you so much.

16 CHAIRPERSON SAWYER: Mr. Burns.

17 MR. BURNS: Thank you, Dr. Sawyer. I'm Vaughn

18 Burns from DaimlerChrysler. We are a member of the

19 Alliance of Automobile Manufacturers, but I am here today

20 to hopefully set the record straight regarding the

21 DaimlerChrysler case, specifically, Ms. D'Adamo's

22 questions regarding excess emissions.

23 We found the staff's analysis to be fundamentally

24 flawed. Of the 150,000 vehicles in question, staff said

25 that we only agreed to voluntarily recall 41,000, when in

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 1 fact Jerry Martin's December 2005 press release from ARB

 2 said we've voluntarily agreed to recall 91,000 vehicles.

 3 Secondly, one small engine family, 2.5 liter Jeep

 4 Wrangler that spent 85 percent of its time off road, had a

 5 high warrantee rate of 72 percent. Staff took that number

 6 and applied that failure rate to the rest of the remaining

 7 vehicles.

 8 Third, staff assumed all excess emissions to be

 9 anything above zero in their calculation.

10 By these measures, staff exaggerated the excess

11 emissions by over an order of magnitude. So please

12 consider that. And, Ms. D'Adamo, I hope this helps you to

13 understand better. We're quite disappointed that the

14 staff would mislead the Board in exaggerating these

15 numbers.

16 Next to address Professor Sperling's question.

17 Dr. Sperling, we under the current regulations we have a

18 right to demonstrate that on average vehicles in question

19 continue to pass the emissions standards over the full

20 useful life. And we did exactly that. We had over 13

21 different sources of information, including ARB's own

22 data, EPA's data, that showed the vast majority of these

23 35-some engine families continue to pass emissions

24 standard on average. Why was that? These vehicles

25 continued to have the catalyst replaced under the existing

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 176

 1 warrantee period.

 2 So finally, you know, two incidents in the last

 3 20 years are not reason to change this regulation. The

 4 Toyota case has been addressed with the OBD regulation.

 5 The DaimlerChrysler case which was unfairly overstated by

 6 the staff is not one reason in 20 years to make these

 7 changes. Thank you.

 8 CHAIRPERSON SAWYER: Thank you. Would staff like

 9 to answer being off a factor of ten?

10 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

11 MURCHISON: In the original staff report, the range that I

12 gave Ms. D'Adamo -- we did a range basically. At one

13 point assumed 20 percent of the vehicles would have a

14 certain cracked catalyst rate, and that was the 54 tons

15 per year. And then we assumed the worst case of 72

16 percent failure, which gave the high at 1783. So we tried

17 to establish a range of where the emissions could fall in

18 because we don't know where exactly ultimately where they

19 would end up. So we kind of box range. So I'm not sure

20 where he's --

21 MR. BURNS: Did you not calculate all emissions

22 from the vehicle was excess emissions? I think if you go

23 back and look at your calculation, you assumed any

24 emission coming out of the tailpipe of that vehicle to be

25 excessive. Anything over zero. That's impossible.
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 1 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

 2 MURCHISON: No. We choose --

 3 MR. BURNS: I would request the Board to ask the

 4 staff to go back and verify the calculation. I guarantee

 5 you'll find that's what they did. It's the only way they

 6 could come up with such an exaggerated number.

 7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We'd be

 8 glad to go back and look at it. But I don't think it

 9 changes the point here at all that there are excess

10 emissions from catalysts. And this was such an egregious

11 case it just sticks out as an example, as Dr. Sperling

12 said, to kind of learn from.

13 And there was just no reason why we had to go

14 through all these arguments when the catalysts were

15 physically deteriorating and blowing out the tailpipe of

16 these cars. And, yet, we did over this whole emission

17 issue. And there's no doubt we tested cars. Without the

18 catalyst on it you got emissions increases many times the

19 standard. And with other catalysts that had a crack in

20 them, there were starting to deteriorate. Their emission

21 impact was a lot less. There's no way of concluding that

22 the emission impact was small or something that we

23 shouldn't worry about it in this kind of a situation.

24 MR. BURNS: If I may, one other interesting

25 statistic, based on their own data and EPA's data, less
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 1 than one percent of these vehicles in question had fully

 2 deteriorated catalysts.

 3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: At the

 4 mileage that they were tested at, which in most cases was

 5 half of their life. They still had another half to go.

 6 And the trend here in looking at the catalysts which was a

 7 similar design on all these was they're going to get worse

 8 with time.

 9 CHAIRPERSON SAWYER: Mr. Fornier.

10 Mr. Korthof.

11 MR. KORTHOF: Doug Korthof.

12 It's interesting that you allow company

13 representatives to stand up here and engage in dialogue

14 with staff, but you don't do that with the general public.

15 This is violation of the Brown Act. Somebody concludes

16 their testimony, the staff is allowed to respond. If

17 there's questions for the person here, those questions

18 should be directed to the person and the answer should be

19 done in accordance with the Brown Act regulations. There

20 shouldn't be a cozy dialogue back and forth, which we saw

21 in 2003 when the representatives of Ford, General Motors,

22 and Honda schmoozed with the Board. And what was the

23 result? We lost all of our cars.

24 With the existing nickle metal hydroid technology
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25 in an all-electric zero-emission vehicle such the Toyota

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 1 RAV 4 EV off-peak charging paid for by on-peak production

 2 of excessive credits helping the grid. There's no wells

 3 in the wells to wheel equation. We don't need petroleum

 4 whatsoever to run our car. And we donate electricity

 5 every year to the grid.

 6 If you solve the underlying problem, the rest

 7 falls into place. If you get distracted by regulations

 8 such as this with symptoms and ignore the problem, you'll

 9 be engaged in never-ending problems with no substance and

10 no solution. You'll generate controversy.

11 As was said by a Japanese emperor in the game of

12 go and his son was coming in a battle, he was distracted

13 by a small skirmish, and the emperor lost the battle.

14 That's what you're doing. You're getting distracted by

15 small things. You introduce a zero-emission vehicle

16 mandate, you don't have these problems. Since there's no

17 emissions, there's no controversy about the failure of

18 emission control devices. The Toyota RAV 4 EV can have a

19 range extended for long trips if that was an issue.

20 Hundreds of these are still running, which still

21 have over 100 miles range after five years of relatively

22 faultless service. Only $13,000 for the battery pack as

23 certified by CARB, including profit. All we need to do to
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24 address the problem is put these on the road. What's the

25 risk of doing this? Who are you going to alienate? Ford,

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 1 Daimler, and General Motors? Don't care about that.

 2 Stand up to these people. You're not supposed to roll

 3 over for Ford and General Motors. You're supposed to

 4 stand up for the general public, the people that are

 5 breathing this air.

 6 What is the risk? Nothing. Why wait for lithium

 7 or hydrogen research? We can do this now. All it takes

 8 is the enforcement of a zero-emission vehicle mandate

 9 regulation. No more emissions problems. No more

10 controversies like this where you have 100 people bust in

11 from all over the state to argue about saving their small

12 businesses. I saw the same thing down in AQMD where the

13 Western States Petroleum bussed this all these Koreans and

14 plating shops and Mexican American chrome platers to do

15 the argument, and they stood outside the hall while the

16 other people went and argued for the refinery pollution.

17 We don't want to see this. We want to see a

18 zero-emission vehicle mandate, get rid of these

19 regulations and just stand up for it. Don't believe Ford,

20 General Motors, and Chrysler. These are the people you

21 shouldn't listen to. These are the people that told you

22 in 1994 that EVs were impossible. They sued you in 2000.
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23 In 2003, they said --

24 CHAIRPERSON SAWYER: Please conclude.

25 MR. KORTHOF: -- "Wait for fuel cells. And we're

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 1 going to do hydrogen. We're going to fix things." They

 2 lied. And you have to say to yourself, are we fooled

 3 once? We're fooled twice. We're fooled three times.

 4 What's it going to take to stand up to these people and

 5 get some results?

 6 CHAIRPERSON SAWYER: Our concluding witnesses

 7 will be Henry Hogo, Bonnie Holmes-Gen, and Bill Magavern.

 8 Henry Hogo.

 9 MR. HOGO: Good afternoon, Chairman Sawyer,

10 members of the Board. For the record, I'm Henry Hogo.

11 I'm the Assistant Deputy Executive Officer at the South

12 Coast Air Quality Management District.

13 Just want to reiterate the South Coast AQMD staff

14 strongly supports the staff proposal to amendments to the

15 emissions warrantee requirements and test procedures. We

16 have submitted a comment letter. Just want to make a

17 couple of points. We believe the proposed amendment will

18 strengthen the compliance rate of emission control

19 systems, provides assurance that these parts will --

20 defective parts will be fixed. And that's very important

21 as we look at attaining air quality standard and
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22 maintaining air quality standard.

23 And, ultimately, it would ensure that the quality

24 and durability of these parts last. As we look at having

25 more and more emission control systems placed on legacy

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 1 fleets, we really need that assurance they won't be

 2 defective parts and they won't be excessive emissions.

 3 I just want to bring back a couple points that

 4 were made earlier relative to Dr. Gong's reference to the

 5 colorful slide that shows the impacts of traffic pollution

 6 on population. And that's assuming that we're going to

 7 clean up the fleet. But if the excess emissions of

 8 defective parts are still there, we're not going to get

 9 there.

10 The second part is the presentation which shows

11 the emission sources of NOx, 15 percent of that NOx source

12 comes from passenger vehicles. So if we're looking to

13 control every bit of NOx that we can do, we do need to

14 focus on making sure that we get those controls and they

15 be maintained.

16 So with that, I would conclude that we urge your

17 Board to adopt staff's proposal today. Thank you.

18 CHAIRPERSON SAWYER: Thank you.

19 Bonnie Holmes-Gen, Bill Magavern.

20 MR. MAGAVERN: Bill Magavern representing Sierra
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21 Club, California in support of the staff proposal.

22 We've become increasingly concerned with

23 emissions from in-use vehicles. And, of course, this

24 morning in the context of discussion of the SIP, we heard

25 about the importance of getting all the emission

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 1 reductions that we can. And this proposal in front of you

 2 now will help to do that.

 3 In some ways, it's a complex proposal. And I

 4 think we've had some obfuscation from the manufacturers

 5 who don't want to fix their defective parts. But I think

 6 it can be boiled down really to two important policy

 7 issues. The first is the current program is not working.

 8 The staff have told you that. It's not enforceable. The

 9 result is there are broken parts on the cars. They're not

10 being fixed. That's unfair to the consumers. And most

11 importantly, it's bad for the air. This has been going on

12 for years now. You've heard examples of why it needs to

13 be changed. And the changes the staff is suggesting are a

14 package that forms the necessary improvements that make

15 the program work. You should adopt this package without

16 any change. You should do that today and get it working.

17 The industry is trying to avoid correcting

18 defective emission control parts for which they are

19 responsible. They should have to correct for their own
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20 mistakes and keep the promises that they made when they

21 made and sold the cars.

22 The second issue is these emission control

23 devices that are installed on the cars are there for a

24 purpose. They reduce emissions. If the parts fail, they

25 cause emissions to go up. Now whether that failure

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 1 results in emission standards being exceeded is not the

 2 issue, because the issue is that there are excess

 3 emissions, because some manufacturers did produce vehicles

 4 with faulty parts. The logical conclusion is that the

 5 defective parts that cause the excess emissions need to be

 6 fixed because we need the emission reductions to protect

 7 the public health. For that reason, I urge you to adopt

 8 the proposal without delay. Thank you.

 9 CHAIRPERSON SAWYER: Thank you very much.

10 That concludes the public witness part of the

11 agenda. I now close the record on this agenda item.

12 However, the record will be reopened when the 15-day

13 Notice of Public Availability it issued. Written or oral

14 comments received after this hearing date but before the

15 15-day notice is issued will not be accepted as part of

16 the official record on this agenda item. When the record

17 is reopened for a 15-day comment period, the public may

18 submit written comments on the proposed changes, which
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19 will be considered and responded to in the Final Statement

20 of Reasons for the regulation.

21 As a reminder to Board members, our policy

22 concerning ex parte communications. While we may

23 communicate off the record with outside persons regarding

24 Board rulemaking, we must disclose the names of our

25 contacts and the nature of our communications on the

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 1 record. This requirement applies specifically to

 2 communications which take place after the public agenda of

 3 the Board hearing has been published. We will take the ex

 4 partes.

 5 Dr. Gong?

 6 BOARD MEMBER GONG: None.

 7 CHAIRPERSON SAWYER: Ms. D'Adamo?

 8 BOARD MEMBER D'ADAMO: Yes. This morning I had a

 9 telephone call with Steven Douglas with the Alliance of

10 Automobile Manufacturers. And he voiced concerns that

11 were similar to the concerns that he raised today.

12 CHAIRPERSON SAWYER: Mr. Hill.

13 SUPERVISOR HILL: Thank you, Mr. Chair.

14 On March 9th, I had a phone call from Steven

15 Douglas of the Alliance and Al Prescott from Ford

16 discussing the issues that they raised today and that were

17 raised in the hearing in December.
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18 On March 20th, there was a meeting in my Redwood

19 City office with Norman Plotkin of the CAWA and AAIA and

20 Allen Pennebaker from the Automotive Service Councils of

21 California discussing the issues they raised today as well

22 as in the testimony.

23 CHAIRPERSON SAWYER: Thank you.

24 Ms. Kennard.

25 BOARD MEMBER KENNARD: Yes. I had no ex parte

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 1 communications, but I'd like to disclose I was a member of

 2 the RAND Board from approximately 2002 through October of

 3 2005, and I joined that Board February of this year. I

 4 had no contact with staff regarding any of these matters.

 5 CHAIRPERSON SAWYER: On December 5th, I had a

 6 telephone conversation with Steven Douglas. The subject

 7 was similar to what was presented today.

 8 On the 5th of December, a conference call with

 9 Norman Plotkin and Aaron Lowe, also similar to what we

10 heard today.

11 On the 14th of March, I met with Norman Plotkin,

12 again similar to what we heard today.

13 On the 21st of March, I met with Steven Douglas,

14 Jeff Clark, Vaughn Burns, Sara Rudy, and Stewart Johnson

15 at the Air Resources Board offices, similar discussion to

16 what we heard today.
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17 And I also had a telephone conversation with John

18 Cabaniss yesterday reflecting comments similar to what he

19 presented today.

20 BOARD MEMBER RIORDAN: Mr. Chairman, on March

21 12th, I met with Steven Douglas of the Alliance of

22 Automotive Manufacturers, and that conversation mirrored

23 what he said and what the members said today on the

24 record.

25 CHAIRPERSON SAWYER: Mr. Sperling.

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 1 BOARD MEMBER SPERLING: On March 6th, I met Reg

 2 Modlin and Bill Craven and Vaughn Burns from

 3 DaimlerChrysler in my offices at UC Davis. And the

 4 discussion was similar to what the Alliance presented

 5 here, Steve Douglas and Vaughn Burns presented as well.

 6 And then I had a telephone conversation with the

 7 California Automotive Wholesalers Association and the

 8 Automotive Aftermarket Industry Association with Norm

 9 Plotkin, Aaron Lowe, and Allen Pennebaker about their

10 concerns that have been expressed here about how the

11 aftermarket business participates.

12 CHAIRPERSON SAWYER: Ms. Berg.

13 BOARD MEMBER BERG: Mr. Chairman, I had the

14 following phone conversations with the Alliance of

15 Automotive Manufacturers and Ford on December 5th, March
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16 6th, and March 20th. And all those conversations mirrored

17 the testimony that we heard today.

18 I also had a conversation with the Caterpillar

19 people on March 20th and a little side bar conversation at

20 the Faster Freight Conference in Long Beach on February

21 26th. And the information that was exchanged is also

22 concurrent with their written submittal testimonies, as

23 they did not testify today.

24 I also had a conversation on March 20th, a phone

25 conversation, with Norman Plotkin and Allen Pennebaker

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 1 from the California Automotive Association Wholesalers

 2 Association and the Automotive Aftermarket Industry

 3 Association. And our conversation also mirrored their

 4 testimony today.

 5 Thank you very much.

 6 CHAIRPERSON SAWYER: Supervisor?

 7 BOARD MEMBER ROBERTS: No.

 8 CHAIRPERSON SAWYER: The Board has before it

 9 Resolution Number 6-44. Do I have a motion to adopt?

10 BOARD MEMBER D'ADAMO: So moved.

11 BOARD MEMBER RIORDAN: I'll second the motion,

12 Mr. Chairman.

13 CHAIRPERSON SAWYER: The motion to adopt has been

14 made and seconded.
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15 Is there further discussion by Board members? If

16 not, we will take a vote. And would the Clerk please call

17 the role?

18 SECRETARY ANDREONI: Ms. Berg?

19 BOARD MEMBER BERG: Aye.

20 SECRETARY ANDREONI: Ms. D'Adamo?

21 BOARD MEMBER D'ADAMO: Aye.

22 SECRETARY ANDREONI: Dr. Gong?

23 BOARD MEMBER GONG: Yes.

24 SECRETARY ANDREONI: Supervisor Hill?

25 SUPERVISOR HILL: Aye.

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 1 SECRETARY ANDREONI: Ms. Kennard?

 2 BOARD MEMBER KENNARD: Yes.

 3 SECRETARY ANDREONI: Ms. Riordan?

 4 BOARD MEMBER RIORDAN: Aye.

 5 SECRETARY ANDREONI: Supervisor Roberts?

 6 BOARD MEMBER ROBERTS: Aye.

 7 SECRETARY ANDREONI: Dr. Sawyer?

 8 CHAIRPERSON SAWYER: Yes.

 9 SECRETARY ANDREONI: Professor Sperling?

10 BOARD MEMBER SPERLING: Yes.

11 SECRETARY ANDREONI: The motion passes.

12 CHAIRPERSON SAWYER: Thank you very much.

13 I think it's about time that we took a break. I
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14 appreciate the patience of everybody, staff, audience

15 members, Board members. And we will reconvene at 2

16 o'clock.

17 (Thereupon a lunch recess was taken.)

18 CHAIRPERSON SAWYER: Because the next two agenda

19 items, 7-3-3 and 7-3-4 are related, we will consider them

20 together and combine the public testimony. However, when

21 we vote, we will consider two separate Resolutions.

22 The proposed amendments apply to the statewide

23 portable equipment registration program, or PERP

24 registration, and to the Airborne Toxic Control Measure

25 for diesel-fueled portable engines. One element is

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 1 adoption of permanent amendments, and the other is

 2 adoption of emergency amendments that will apply until the

 3 permanent amendments become operative.

 4 Ms. Witherspoon, please introduce the items and

 5 begin the staff presentation.

 6 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr.

 7 Sawyer.

 8 Today's amendments are a follow-up package to the

 9 emergency amendments adopted by the Board in December of

10 2006. Those amendments were a fast track joint effort

11 between industry, CAPCOA, and ARB staff to address the

12 current hardship borne by those who, for various reasons,
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13 had not registered their portable equipment and paid fees

14 on a schedule established in the existing PERP program.

15 Prior to the emergency amendments, those owners could not

16 enter the PERP program. Many would have to buy

17 replacement equipment to comply with PERP requirements and

18 indicated they would suffer severe economic hardship to

19 the extent they might go out business.

20 Staff also heard comments from other members of

21 industry who have incurred significant cost by investing

22 in cleaner complying equipment over the last decade, have

23 paid registration fees, and have complied with the

24 requirements of the PERP program. Those owners believe

25 they've been placed at a competitive disadvantage compared

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 1 to those who did not comply and generally opposed

 2 open-ended changes to open the PERP program to

 3 non-complying engines and wanted financial consequences

 4 for past non-compliance.

 5 Staff worked with the affected stakeholders to

 6 develop the emergency amendments to address these

 7 concerns. Today's amendments are the culmination of that

 8 effort. They're intended to make permanent the emergency

 9 amendments. Also other provisions will provide clarity

10 and expediency to implementation of the rule.

11 Staff is proposing a new set of emergency
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12 amendments to both regulations to ensure that the existing

13 requirements continue uninterrupted between the time the

14 original emergency amendments expire, which is 120 days

15 after the December hearing, and the day these proposed

16 amendments take effect. It's just a little bridge

17 emergency amendment. It's not substantive.

18 We believe staff has developed a balanced

19 proposal that allows businesses to provide essential

20 services, recognize economic investment of those complies,

21 and at the same time obtains the emission reductions

22 needed to protect public health.

23 We have the support from many but not all of the

24 effected industry. Their comments you may hear today

25 regarding the need for allowing older uncertified portable

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 1 engines into the PERP program that currently do not

 2 qualify for State registration. Those older engines have

 3 significantly higher emissions, and staff believes the

 4 impact from those engines are most appropriately evaluated

 5 by local air districts instead.

 6 I'd now like to have Mr. Joseph Gormley with the

 7 Stationary Source Division present staff's proposal.

 8 (Thereupon an overhead presentation was

 9 presented as follows.)

10 AIR RESOURCES ENGINEER GORMLEY: Thank you,
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11 Ms. Witherspoon. Good afternoon, Dr. Sawyer and members

12 of the Board.

13 --o0o--

14 AIR RESOURCES ENGINEER GORMLEY: This slide

15 represents an overview of the topics I will cover in

16 today's presentation.

17 --o0o--

18 AIR RESOURCES ENGINEER GORMLEY: First, we will

19 start with some background information on both the

20 Portable Equipment Registration Program and the portable

21 engine ATCM.

22 --o0o--

23 AIR RESOURCES ENGINEER GORMLEY: The regulation

24 for Portable Equipment Registration Program, also known as

25 PERP, establishes a uniform registration program for

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 1 owners of portable engines and equipment units. It is a

 2 voluntary program that allows owners of portable equipment

 3 to operate throughout the state without having to obtain a

 4 new permit each time they move into a new air district.

 5 Although the ARB issues the actual registration, the local

 6 districts are still primarily responsible for inspections

 7 and enforcement.

 8 The regulation was adopted in March of 1997, and

 9 the program started taking applications on September 17th,
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10 1997. Since then, the PERP regulation has been amended

11 three times, in 1998, 2004, and just last year in June.

12 --o0o--

13 AIR RESOURCES ENGINEER GORMLEY: The Air Toxic

14 Control Measure for portable diesel-fueled engines came

15 about as a result of the Diesel Risk Reduction Plan which

16 the Board adopted in September of 2000. It establishes

17 emission reductions from portable diesel engines by

18 setting requirements for newly permitted or registered

19 engines, mandating the replacement of older higher

20 emitting engines by 2010, and establishing fleet emission

21 standards. These requirements are applicable to all

22 portable diesel engines whether registered in PERP or

23 permitted by the local district. The ATCM was adopted by

24 the Board in February of 2004 and became effective in

25 March of 2005.

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 1 --o0o--

 2 AIR RESOURCES ENGINEER GORMLEY: Several industry

 3 representatives testified at the September 2006 Board

 4 hearing about the inability to permit or register their

 5 older engines after January 1st, 2006. The regulations at

 6 that time would only allow permitting or registration of

 7 engines that met the most stringent standard in effect.

 8 Despite considerable outreach activities, many
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 9 owners of portable equipment were still unaware of the

10 requirement to have a permit or registration in order to

11 operate their engines.

12 In December, the Board responded to these

13 concerns with emergency amendments to the PERP regulation

14 and the ATCM to provide additional flexibility. These

15 emergency amendments will expire on April 26th, 2007.

16 --o0o--

17 AIR RESOURCES ENGINEER GORMLEY: Today, staff is

18 proposing amendments that would make the emergency

19 amendments adopted in December permanent. In addition,

20 staff is proposing some amendments that would provide

21 additional clarity to the regulations and assist with the

22 implementation of the Statewide Registration Program.

23 As mentioned previously, the emergency amendments

24 adopted in December will expire on April 26th of this

25 year. If adopted, these permanent amendments will not

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 1 become effective until after the expiration of those

 2 original emergency amendments. Therefore, we are

 3 proposing a second set of emergency amendments to ensure

 4 that there is no loss of regulatory authority and that the

 5 ARB and the local air districts may continue to accept

 6 applications.

 7 --o0o--
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 8 AIR RESOURCES ENGINEER GORMLEY: I will now

 9 discuss the actual amendments.

10 --o0o--

11 AIR RESOURCES ENGINEER GORMLEY: At the December

12 hearing, the Board acted to allow the PERP registration of

13 Tier I and Tier II engines if they have resided in

14 California at any time during the period between March

15 1st, 2004, and October 1st of 2006. The local air

16 district may also permit these resident Tier I and II

17 engines and they are also given the authority to permit

18 uncertified engines also referred to as Tier Zero engines

19 at their discretion.

20 Effective January 1st, 2010, we are going back to

21 allowing only those engines meeting the most stringent

22 emissions standard in effect to be eligible to obtain a

23 permit or registration.

24 --o0o--

25 AIR RESOURCES ENGINEER GORMLEY: Also added to

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 1 the regulations were compliance flexibility provisions

 2 that allow registration without additional fees or

 3 residency documentation for two different situations.

 4 Older Tier I and Tier II engines may be registered if it

 5 can be proven that the current tier engines are not

 6 sufficiently available in the marketplace. Additionally,
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 7 previous tier engines may be registered for six months

 8 after an emissions standard change under certain

 9 circumstances.

10 Finally, the BACT registration established for

11 resident Tier I and II engines in the emergency amendments

12 adopted in December will continue.

13 --o0o--

14 AIR RESOURCES ENGINEER GORMLEY: Staff is also

15 proposing some additional changes to the regulations that

16 were not part of the original December emergency

17 amendments. These are clarifications and minor revisions

18 that will assist in the implementation of the Statewide

19 Registration Program. These additional amendments were

20 originally published in the staff report released on

21 February 2nd, 2007.

22 We are proposing that rental equipment units such

23 as rock crushers, wood grinders, or abrasive blasting

24 units only be required to track daily throughput and not

25 daily hours. Staff believes this requirement to track

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 1 daily hours for this type of equipment is redundant and

 2 unnecessary. Rental engines, however, will still be

 3 required to track daily hours.

 4 We are proposing that military tactical support

 5 equipment should be exempt from the identification placard
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 6 requirement. We are proposing to allow the registration

 7 in PERP of any engines that has a current valid district

 8 permit that was issued prior to January 1st, 2006. We

 9 want to clarify that resident Tier Zero engines may only

10 be permitted by the air districts even if they are

11 designated as low use or emergency use.

12 And, finally, we are also making some minor

13 wording changes for clarity which will improve the

14 clarification of the Statewide Registration Program.

15 --o0o--

16 AIR RESOURCES ENGINEER GORMLEY: After the

17 publication of our staff report on February 2nd, 2007, we

18 found some additional changes that we believe were

19 necessary for clarity and conformity purposes. These

20 changes are applicable only to the PERP regulation. We

21 are proposing to amend the annual reporting requirement

22 for rental equipment units to be consistent with the

23 proposed change to the daily recordkeeping requirement.

24 Annual reports will summarize material throughput instead

25 of hours. We are proposing to specify that material

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 1 throughput be measured at the initial loading point for

 2 rock crushing and screening plants.

 3 We are proposing to restore the requirement in

 4 the PERP regulation that all uncertified spark ignition
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 5 engines be removed from the program by 2010. This

 6 requirement was inadvertently deleted with the amendments

 7 in June of 2006. This restoration will ensure the

 8 emission reductions from the replacement or retirement of

 9 any older high-emitting gasoline engines.

10 It should be noted that the owners of these

11 engines may have the option of obtaining district permits

12 once they are removed from the PERP.

13 Finally, we are proposing to add a clarification

14 that specifically requires operating conditions that are

15 with the registration to be kept on site at all times with

16 the registered engine or equipment unit. This should

17 facilitate compliance and enforcement in the field.

18 --o0o--

19 AIR RESOURCES ENGINEER GORMLEY: As mentioned

20 previously, the original emergency amendments expire on

21 April 26th, 2007, and the permanent amendments proposed

22 here today will not become effective before that date.

23 Therefore, a second set of emergency amendments are

24 necessary to maintain regulatory authority so the ARB and

25 local districts may continue to accept applications and

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 1 process these under these provisions.

 2 The second set of emergency amendments will

 3 include all the provisions in the proposed permanent
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 4 amendments and the 15-day changes. Because these

 5 emergency amendments will only serve to keep regulatory

 6 authority contiguous until the permanent amendments take

 7 effect, it is not expected the Board will have to take any

 8 follow-up action.

 9 --o0o--

10 AIR RESOURCES ENGINEER GORMLEY: We have over the

11 course of developing these amendments received comments

12 from members of industry regarding some of the

13 requirements in the regulations, and we would like now to

14 summarize those.

15 --o0o--

16 AIR RESOURCES ENGINEER GORMLEY: Certain members

17 from industry have requested that we open up PERP

18 registration to Tier Zero engines. These engines have

19 much higher NOx and PM10 emissions than certified engines.

20 Due to the significantly higher emissions, we believe it

21 is inappropriate to include these engines in a program

22 that would allow them to operate on a statewide basis.

23 We have previously given three opportunities to

24 register this older equipment, with the understanding that

25 the engines would have to be removed from service by the

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 1 start of 2010. Until this time, these engines may be
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 2 permitted locally at the air district's discretion.

 3 The crane industry would also like the ability to

 4 register older Tier I and Tier II certified engines that

 5 are brought in from out of state. In addition, because of

 6 the technical cost and logistical issues related to the

 7 retrofit of cranes, the industry would like to be able to

 8 continue the use of Tier Zero engines after 2010.

 9 Finally, because of multiple air quality

10 regulations that apply to cranes, they are interested in

11 developing a crane-specific regulation and have recently

12 provided us with a draft consolidated regulation. We are

13 currently evaluating their proposed regulation with a

14 focus on equivalent emission reductions, and we are

15 continuing our dialogue with the industry. We are

16 committed to providing the industry with the decision

17 within the next three months. And if warranted, we will

18 propose appropriate regulatory modifications.

19 --o0o--

20 AIR RESOURCES ENGINEER GORMLEY: Now we will

21 discuss the next steps in the process.

22 --o0o--

23 AIR RESOURCES ENGINEER GORMLEY: If the permanent

24 amendments and emergency amendments are adopted today, we

25 will proceed with the final approval process with the

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 1 Office of Administrative Law and filing with the Secretary

 2 of State. Once the amendments are effective, we with

 3 continue to accept applications for engines that comply

 4 with these provisions. We have already begun aggressive

 5 outreach activities which have included sending out almost

 6 300,000 postcards to members of affected industry that may

 7 be subject to these requirements, dedicating resources to

 8 assist the public with questions and applications, and

 9 developing a specific informational website.

10 --o0o--

11 AIR RESOURCES ENGINEER GORMLEY: Kathleen Quetin

12 will elaborate more on these outreach efforts in her

13 Ombudsman statement.

14 And here we have a picture of the postcard that

15 was mailed out on March 7th, 2007, to almost 300,000

16 people.

17 --o0o--

18 AIR RESOURCES ENGINEER GORMLEY: Finally, we will

19 move on to staff's recommendation.

20 --o0o--

21 AIR RESOURCES ENGINEER GORMLEY: Staff recommends

22 that you adopt the proposed permanent amendments with the

23 15-day changes. Staff also recommends that the Board

24 direct the ARB's Executive Officer to prepare a finding of

25 emergency and that you adopt the proposed emergency

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 202

 1 amendments.

 2 Thank you. That concludes my presentation.

 3 CHAIRPERSON SAWYER: Thank you very much.

 4 Madam Ombudsman, please prescribe the public

 5 participation process that occurred during the development

 6 of this item and report any concerns you may have to the

 7 Board at this time.

 8 OMBUDSMAN QUETIN: Thank you. Dr. Sawyer and

 9 members of the Board, this regulation has been developed

10 with input from the local districts, the construction

11 industry, oil fuel service, oil drilling, equipment

12 rental, Caltrans, local governments, public utilities,

13 telecommunications, United States military, crane

14 industry, engine manufacturers, wood grinding, concrete

15 pumping, water and sanitation districts, and aggregate

16 processing.

17 They held one public workshop on January 19th,

18 2007, in Sacramento, and approximately 35 stakeholders

19 attended the workshop. And many individuals participated

20 via teleconference and webcast. The staff report and

21 public notice were released on February 2nd, 2007. Nearly

22 3,000 companies and government agencies received this

23 information. Also, more than 1700 were notified via the

24 list serve.

25 There are a few outstanding concerns that

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 203

 1 industry will present during the public testimony period.

 2 It's very likely you will hear from members of the

 3 construction industry and the crane industry.

 4 Notwithstanding the comments you will hear from industry,

 5 I would like to switch to a slightly different subject.

 6 As you heard from staff, there were concerns voiced

 7 regarding the fact that many owners of portable equipment

 8 were unaware of the State Registration Program. ARB staff

 9 took this criticism to heart and responded aggressively.

10 I would like to take a few minutes to describe in more

11 detail the outreach activities that have been undertaken

12 in order to inform effected industry about the recent

13 amendments to PERP.

14 On March 7th, 2007, ARB staff mailed an

15 informational postcard, as you saw, to about 296,000

16 contractors informing them about the recent amendments to

17 PERP. The mailing list was provided to the ARB in

18 February 2007 by the California Contractors' State License

19 Board and includes every contractor that holds a current,

20 active, or inactive license in any of the licensed

21 categories in the state of California. We didn't want to

22 miss anyone.

23 The postcard delivered a very simple message

24 about the advantages and urgency in be obtaining

25 registration in PERP. The postcard also contained a
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 1 message to assist those who might require information in

 2 Spanish.

 3 ARB staff ordered an additional 25,000 postcards

 4 to be made available to any organization that wishes to

 5 personally distribute the information to its membership or

 6 clients. To date, ARB staff has provided about 8,000

 7 postcards to organizations that made a commitment to mail

 8 them to their members. This includes 5,000 to the

 9 Concrete Pumping Association, 1,100 to the American Rental

10 Association, 1,000 to the California Association of Tree

11 Trimmers and Landscapers, 500 to the California Rental

12 Association.

13 The printing and mailing costs alone of ARB's

14 postcard efforts have amounted to almost $93,000. The

15 postcard recipients are directed to a very simple website

16 address that contains an information sheet that describes

17 in both Spanish and English the advantages, eligibility

18 requirements, and fees for participation in PERP. The

19 information sheet also tells how to contact a live body

20 who can provide further assistance.

21 On March 7th, 2007, ARB staff mailed almost 4,500

22 informational fliers designed for managers of fleets of

23 portable equipment informing them of the recent amendments

24 to PERP.
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25 On March 13th, a similar flier was mailed to

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 1 almost 4,000 owners and operators of portable equipment

 2 currently registered in PERP. ARB staff developed another

 3 flier that is being distributed to equipment rentals

 4 counters, professional association offices, city and

 5 county office buildings, air district offices, and trade

 6 show exhibits informing owners and operators of portable

 7 equipment about recent amendments to PERP. This flier is

 8 available in both Spanish and English and can be

 9 downloaded from ARB's website.

10 ARB's staff also developed a model article for

11 use by editors or professional or industry newsletters,

12 publications in journals to inform readers about the

13 recent amendments to PERP. California Contractors' State

14 License Board has committed to publishing the model

15 article in their upcoming quarterly newsletter, which is

16 distributed to the 296,000 contractors that are licensed

17 by the State of California.

18 In addition, the Golden State Builders Exchange

19 has agreed to publish the model article which will get the

20 word out to nearly 33,000 construction related companies

21 that are included in their membership. ARB staff made a

22 number of improvements to the ARB's portable equipment

23 website to make it easier to navigate for owners and
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24 operators of portable equipment. In particulate, the

25 staff made the website more user friendly for those who

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 1 use the site map to find information about a particulate

 2 type of portable equipment, such as a concrete pump or a

 3 wood chipper.

 4 ARB staff has also posted all of the portable

 5 equipment outreach materials on our website so that local

 6 air pollution control districts and professional

 7 organizations can download, print, and distribute the

 8 materials as they wish.

 9 ARB staff sent a note to the almost 2,000 members

10 of the portable equipment listserve informing them about

11 the availability of these materials. In addition to

12 providing our outreach materials in Spanish, we have a

13 dedicated staff person who responds to phone calls and

14 e-mails from stakeholders who find our outreach materials

15 on our website.

16 On March 15th, 2007, the ARB issued a press

17 release to its almost 1,000 members of the press release

18 list serve providing them with information about the

19 recent amendments to PERP as well as the outreach

20 activities that staff has conducted.

21 In summary, the ARB staff has worked with many

22 private and public organizations to distribute outreach
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23 material about PERP to their members. The private

24 organizations represent memberships of over 50,000 people.

25 ARB staff also contacted operators of used equipment

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 1 auctions and numerous manufacturers, distributors, and

 2 dealers of portable equipment to inform them of current

 3 and regulatory milestones for PERP.

 4 As I mentioned earlier, staff obviously took the

 5 effort for improved outreach seriously. And I think we

 6 owe a thank you to Kitty Howard and her staff for all of

 7 the work that they did to make sure that everyone knows

 8 about how to get into the Portable Equipment Program.

 9 Thank you.

10 CHAIRPERSON SAWYER: Thank you very much.

11 Board members have any questions at this time?

12 We'll begin the public testimony then. The first

13 three speakers are Robert Wilder, Patrick Hurley, and Mike

14 Cusack.

15 Mr. Wilder, please.

16 MR. WILDER: Thank you.

17 I did not know that this was taking place until I

18 received that little yellow card. Didn't say when there

19 was going to be a meeting or anything else. And I am

20 quite illiterate when it comes to computers. But luckily

21 I did have a friend that did know something about it. And
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22 he dug in and come out with quite a bit of information

23 that the Air Resources Board has. And this was one of

24 them telling about the different tiers and the costs of

25 the permitting and all that kind of stuff.

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 1 Another fellow and I took it upon ourselves to

 2 run a little ad. Now, it is small, but it still cost us a

 3 couple hundred bucks trying to get some more people

 4 informed on what's going to be taking place here today.

 5 Well, we understand how the meetings go and continue on

 6 quite often, so some of the people had to leave. But it

 7 seems that on the off-road portable equipment, the little

 8 individual is going to be hammered pretty hard, especially

 9 when the Tier Zero engines are going to be outlawed the

10 way I understand it. I may be wrong. But it seems to me

11 that every time that government begins to be involved in

12 business, everything goes to pot. Thank you.

13 CHAIRPERSON SAWYER: Thank you very much.

14 Mr. Hurley.

15 MR. HURLEY: My name is Patrick Hurley. And

16 originally I had a long letter written. And then my son,

17 who is a mechanical engineer, came home. And I said, "Can

18 you read over this?" And sure, dad. So he read my letter

19 real quick. And there was one I had from another company.

20 And it was a construction company of Sacramento. And then
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21 I had a stack of stuff of papers, and he read through that

22 quickly. He started reading back through it slowly. He

23 started getting a frown on his face and after about 10 or

24 15 minutes he turned to me, and he was getting ready to

25 talk.

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 1 I want to take a pause right now and tell you

 2 something Ab Lincoln said. A man was walking near a barn

 3 when a dog viciously attacked him. He grabbed a pitchfork

 4 after being bit and stabbed the dog in the head, killing

 5 it. At this moment, the dog's owner came at him angrily

 6 screaming, "Why didn't you hit the dog in the rear-end?"

 7 And the man replied, "I would have if his rear-end would

 8 have been attacking me."

 9 And how does this relate to the diesel engine

10 problem? My son said to me, "Dad, it's not a diesel

11 engine problem, but a diesel exhaust problem. And CARB is

12 attacking it from the wrong end."

13 The California Air Resources Board registration

14 for diesel engine exhaust will force contractors to change

15 engines and verify diesel emission control systems every

16 few years. It is an unrealistic and very expensive

17 solution. And I believe it will eventually force

18 thousands of contractors out of business. Tens of

19 thousands of contractor workers will be unemployed.
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20 CARB regulation as now written are not a viable

21 solution to the diesel engines exhaust. CARB and engine

22 manufacturers need to join forces and get the research

23 done to develop a device that will enable engines, even

24 Tier Zero, to comply with the CARB regulations. If the

25 engine manufacturers can't solve a problem, there are

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 1 research engineering companies that could invent and

 2 design VDECS's that would enable all engines to comply.

 3 Instead of changing engines, we need to concentrate on

 4 diesel exhaust. Engines are not the problem. Diesel

 5 exhaust is.

 6 An example of an engineering company that might

 7 be able to do the work is a company called Tava. That's

 8 not just an acronym. It is a private company, family

 9 owned. It is located only about two blocks from here.

10 Tava works on anything from semiconductors to steel mills.

11 And they do everything A to Z, scrubbers, everything on

12 all the different plants.

13 They have clients in Germany where they design

14 and then test equipment for manufacturers in Germany and

15 the United States and elsewhere. They have on staff

16 mechanical engineers, chemists, chemical engineers,

17 electrical engineers, metalers, et cetera. Companies such

18 as Tava should be solving the problem, not people in the
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19 construction industry and similar industries.

20 Contractors build, pave, and repair roads.

21 Contractors build homes, skyscrapers, and construct the

22 buildings we assemble in. Companies such as Tava can

23 invent and design VDECS's. They don't build them. But

24 after they're built, they test the equipment they designed

25 to see if they do the job. Companies such as Tava, and

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 1 there's several of them -- a lot of times Tava, as I

 2 understand, has to compete bid-wise for certain jobs. All

 3 I know is the parameters, because a lot of it is real

 4 secret stuff. There's patents and everything else

 5 involved --

 6 CHAIRPERSON SAWYER: I need to ask you to

 7 conclude, please.

 8 MR. HURLY: And companies such as Tava Research

 9 available technology, create new technology, and design

10 next generation equipment. Solving problems like diesel

11 exhaust is their business.

12 If CARB's present proposed regulations stand,

13 aggregate, concrete, and other building materials will be

14 more costly, making new homes more expensive. Young

15 families already have an extremely hard time affording

16 homes now. Many young families have left California

17 because they can't afford to raise their families here.
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18 Because every time you do anything like this to the things

19 you go to construct homes with, you raise the price of

20 homes. And there's a lot of young people that can't

21 afford homes. Punishing our contractors and young people

22 is not the solution to diesel engine exhaust.

23 And I don't know what kind of economics study

24 that you people have done to all these regulations, but I

25 think it's going to have dire consequences, especially for

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 1 young people. And time is up, right?

 2 CHAIRPERSON SAWYER: Yes.

 3 MR. HURLEY: It up yet?

 4 CHAIRPERSON SAWYER: Yes. Thank you very much.

 5 Mr. Cusack, and then we will have Christi

 6 Collins, Michael Lewis, and Michael Grabowski.

 7 MR. CUSACK: Good afternoon, Dr. Sawyer and the

 8 Board. My name is Mike Cusack. I work for Congo Pumping,

 9 which is located in Concord, California and located

10 throughout the state of California.

11 The decision to reopen registration in December

12 was a step in the right direction, but it fell short on

13 portable engine diesel registration. Not allowing the

14 Tier Zero engines to be registered is going to cause a

15 huge hardship on the construction industry. The estimates

16 I hear are anywhere close to -- and I took the low side --
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17 of about 127,000 pieces of equipment that are portable

18 equipment here in the state of California. And only

19 25,000 of those were registered prior to the 2006 closing.

20 If you take a third of those and make them Tier Zero

21 engines, it's going to cost $850 million to replace those

22 engines and equipment. The engines can't be replaced

23 because the plant can't take a new engine.

24 In the concrete pumping industry, there's over

25 7,000 of these pumps in California. And a third of those

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 1 are Tier Zero engines. And the replacement cost of that

 2 is $16 million. When staff talks about the cost of $6.6

 3 million over three years for registration, they're only

 4 talking about back dues and registration and for

 5 inspection. It's a lot higher than that. They said the

 6 affect to small businesses is only going to be $.8

 7 million. I can guarantee you the 7,000 concrete pumps

 8 that are running in the state of California, at least

 9 6,000 are run by mom and pop organizations that have less

10 than three or four employees. And that is small

11 businesses. It's 100 employees. It's not $10 million a

12 year.

13 I feel that the penalty for late registration

14 falls on the owner of the equipment for not knowing and

15 not going to ARB's website and to staff. Staff has done a
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16 good job now in sending out the cards. I did get my card,

17 and I will get a follow-up card because all my equipment

18 is registered. And I agree with that. It's too little

19 too late, because what happens when Tier Zero engines are

20 gone and the resident Tier I and Tier II engines if

21 they're not in resident, they're gone.

22 I know there's a lot of lip service given to

23 global warming. By taking Tier I engines and Tier Zero

24 engines and having to sell them outside the state, all

25 we're doing is moving the problem somewhere else. It's a

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 1 global warming thing, whether it's in Nevada or Arizona or

 2 Mexico, they're creating the same amount of pollution

 3 there as they would create here.

 4 I was at an auction by one of the largest auction

 5 companies in the United States, in the world, as a matter

 6 of fact. There were thousands of Tier I, Tier Zero, and

 7 Tier II engines that were sold that day that could not be

 8 registered in this program. They did not have residency,

 9 and the people did not know about it. It's a shame. I

10 saw people spending good money they will not be able to

11 use that equipment here in the state of California. We

12 need to get -- the outreach program has to go out to these

13 auction houses, because they're selling them everyday

14 equipment that cannot be used under the regulation.
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15 I implore you to change the regulation to allow

16 Tier Zero engines in. If we want to eliminate them in

17 2007, I agree with that. If you have them registered, you

18 know where they're at, you can get rid of them. If

19 they're not registered, they'll continue to be underneath

20 the radar. And as long as they're underneath the radar,

21 there's no regulating unless you try to do it enforcement

22 wise.

23 Any questions? Thank you.

24 CHAIRPERSON SAWYER: Thank you.

25 Ms. Collins.

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 1 MS. COLLINS: Good afternoon. My name is Christi

 2 Collins. I'm the Executive Director of the American

 3 Concrete Pumping Association.

 4 The emergency amendment last December to reopen

 5 the Portable Registration Program was only the first step

 6 towards rectifying a gross injustice to the owners of

 7 portable engine equipment owners and to the residents of

 8 the state of California.

 9 This program still has many problems that need to

10 be resolved before a permanent decision on the temporary

11 changes becomes final. Tier Zero engines need to be

12 allowed into the statewide program. Just because you

13 don't want Tier Zero engines into the program doesn't mean
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14 they don't exist. They still continue to operate in the

15 state every day. We estimate in the concrete pumping

16 industry about two-thirds of all of our portable engines

17 have Tier Zero engines.

18 Allow the state-wide registration program to

19 fulfill its intended function and identify where these

20 types of equipment are located. The statewide

21 registration program should be an all inconclusive program

22 and not divided up amongst individual air districts, which

23 may or may not even allow the engines into their program.

24 The resident engine policy will have costly and

25 long-term effects to the California used construction

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 1 equipment market. Unless an engine was previously

 2 operated in California, a brand-new piece of equipment

 3 containing a Tier III engine must be purchased. Upgrading

 4 to new equipment is very costly to the small business

 5 owner and in fact only just now becoming available. The

 6 first Tier III engine in the portable concrete pumping

 7 industry was just sold this past January. These engines

 8 are not readily available and will not be until much

 9 later.

10 By matter of record, we also know not very many,

11 if hardly any at all, portable Tier I and II engines were

12 registered up until December 2006 in the statewide
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13 program. This leaves a very limited quantity of used

14 equipment available. What do you do if you can't buy used

15 equipment? I would hate to think as a consumer I had to

16 buy a brand-new car every time a cleaner model engine was

17 produced. It is simply impractical.

18 The revised fee schedule is unjust. In fairness

19 to those who actually register their equipment in earlier

20 years, we supported a late penalty for registration fees.

21 However, charging for inspection fees when the inspections

22 were not administered seems punitive.

23 Because of our own outreach before the postcards

24 were mailed, we reached out to our members, and especially

25 at our trade show in January which was held in Las Vegas.

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 1 So we had a lot of people from California. And that was

 2 one of the messages in our booth. If you own portable

 3 equipment, you've got to get it registered.

 4 I had a call when I got back from a guy that just

 5 owns a couple of pieces of equipment, very small business.

 6 And he said, "I'm going to have to take a loan out to pay

 7 these back fees." He said, "I though you said that I

 8 could just go online, register. It wasn't going to be

 9 that big of a deal." Well, I said, "It is easy to

10 register. Unfortunately, the fees are very expensive."

11 He's asking me, "What am I supposed to do?" I would urge
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12 you to reconsider the fee schedule and reduce the fees by

13 at least the yearly inspection fee.

14 You know, there also has to be -- when we said

15 that we supported a back registration fee, the more I got

16 involved in this, the more I learned about how many people

17 didn't know, the one gentleman just got his postcard.

18 There has to be some type of onus on your back because you

19 didn't do a very good job with the outreach program to

20 reduce those fees. I understand that some people did pay

21 them, but clearly not that many did.

22 My comments only reiterate what you have heard

23 before. You've heard from many associations,

24 organizations, and individuals who have all given you the

25 same message in various ways: Your work is not done.

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 1 Let's take a practical approach and create a model program

 2 that can be viewed by other states as one that creates a

 3 cleaner environment and in doing so doesn't break the

 4 backs of the small business owner. To leave the program

 5 as it is without taking into consideration the suggestions

 6 you hear today is simply wrong. Thank you.

 7 CHAIRPERSON SAWYER: Thank you.

 8 Mr. Lewis, Mr. Graboski, and then we'll have Bill

 9 Davis, David Rudin, and Allan Lind.

10 MR. GRABOSKI: I'm Dr. Michael Graboski, and I'm
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11 here representing the American Rental Association.

12 I'd like to address an issue of economic hardship

13 to the membership of ARA that we have asked staff to

14 consider before and during this process but hasn't been

15 addressed at all. And we previously have asked you, the

16 Board, in written comment to provide us help as well.

17 Under PERP, an engine may not be placed in

18 service until a registration is received. Districts can

19 allow equipment to be placed in service earlier, but there

20 is no uniform process. If, for example, equipment is

21 placed in service under a District A approval and a renter

22 takes equipment to District B which has given no such

23 approval, the rental company can be open to an enforcement

24 action. We don't think this is in the spirit of the

25 statewide program.

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 1 According to statute, staff has 90 days to issue

 2 the registration from the time the application is deemed

 3 complete and fees are paid. If, for example, the

 4 applicant transposed a digit in the family name, the

 5 process is extended by the time necessary for ARB to

 6 reject the application and the owner to re-file it. Any

 7 delay in putting equipment into service upon its receipt

 8 is an economic hardship, because the purchaser must pay

 9 financing charges on that equipment. The ARB staff has
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10 suggested that applications are screened nearly

11 immediately upon receipt and a fairly accurate

12 determination of the eligibility for registration is made

13 at that time. Assuming that engines are purchased and

14 meet the most current tier provision, ARA requests there

15 be a statewide policy that allows immediate use of the

16 equipment. And we ask the Board to promote such a policy

17 to remove this hardship from our businesses. Thank you.

18 CHAIRPERSON SAWYER: Thank you very much.

19 Could we have staff comment on this issue on how

20 long it takes to get registered and what can be done to

21 speed up the process?

22 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Well,

23 Mr. Graboski is correct. It allows 90 days for the staff

24 to process the application and submit a registration. We

25 do reject applications that are not complete. But on

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 1 average, we're taking about 25 days now to issue a

 2 registration.

 3 There are a couple of options that we've used in

 4 the past. One of them is that the applicant can work with

 5 us prior to the receipt of an engine and try to get the

 6 paperwork in until they receive the engine. But we can

 7 basically do pre-processing of the application so that

 8 when it's received, we can issue the registration
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 9 promptly. That tends to solve issues with inappropriate

10 fees or just basically filling out the applications

11 incorrectly.

12 The other option available is for the companies

13 to work with the dealers themselves to have the dealers

14 register the equipment. And then once if the dealers go

15 through and register the equipment, then it's basically

16 just a change of ownership. And that is an immediate --

17 there's no time delays for that process to occur. So we

18 have -- the districts do have differing policies on how

19 they handle this issue. And in general, CAPCOA has not

20 been supporting of issuing any sort of temporary

21 registration.

22 CHAIRPERSON SAWYER: I have to think when I buy a

23 car that I'm allowed to drive it away. And I think it's

24 because the dealer provides a temporary registration to

25 me, and then the paperwork is processed by the State later

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 1 than that.

 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER:

 3 That's exactly correct for DMV.

 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And you pay

 5 your fees to the dealer who submits them to the DMV.

 6 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We

 7 are working on a system now that is a web-based system
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 8 where the applicant can go on. We're trying to set it up

 9 so all the fees would be electronic. The application

10 would be electronic. The application would basically --

11 or the program would do pre-screening so that you couldn't

12 submit something that wasn't essentially complete. We're

13 hoping that will even cut down the time even more. But

14 that's actually a couple years away.

15 MR. GRABOSKI: We have a lot of small and medium

16 business owners who don't have the clout with vendors to

17 get them to pre-register equipment, for example.

18 The issue about registering equipment in advance

19 is also a problem, because there's no guarantee that if

20 you fill out an application and you get information which

21 you think is correct early on from the vendor before the

22 equipment is received, that the information is actually

23 accurate. You might get a different unit. You might get

24 just incorrect information in what the vendor provides

25 you. And then you're in exactly the same place you are

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 1 now.

 2 And we think that from an air quality point of

 3 view we don't understand what harm we're doing. If it's a

 4 new engine that meets the most current standards, why

 5 can't it be placed in service? Why must people not be

 6 able to put the equipment in service and have to pay the
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 7 carrying fees?

 8 CHAIRPERSON SAWYER: Do you want to answer that?

 9 STATIONARY SOURCE DIVISION CHIEF FLETCHER:

10 Basically, we don't have a system set up right now to

11 issue any sort of temporary registration. DMV is a little

12 different that you're walking in, you have a face to face

13 contact. You can process that right away. Here, we're

14 limited to a situation where people have to submit by mail

15 the application. So there's a processing time that's

16 involved. Then we have to feedback both the registration

17 sticker and the placard. Just because we don't have a -

18 there's no system that we have that's set up that allows

19 for an immediate issuance of any sort of temporary

20 registration.

21 CHAIRPERSON SAWYER: It sounds to me like this is

22 a real problem that we ought to work on. Perhaps the

23 ultimate solution is a web-based registration where you

24 can get it immediately and stickers come later. But you

25 have something you can print out that allows to use it.

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 1 But it doesn't seem it's right for people to be denied use

 2 of their investment when there's really no air pollution

 3 impact to it.

 4 Dee.

 5 BOARD MEMBER D'ADAMO: I was going to say perhaps
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 6 we could direct staff to -- I'm a little unclear about the

 7 issue with the districts. If we were to develop this,

 8 would the districts automatically have to incorporate that

 9 into their process? Or is there a separate system for the

10 districts?

11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We'd like

12 some time to work on it, because as you know, reaching

13 consensus with this item was difficult. We have an

14 ongoing agreement that if we modify the program, we'll

15 maintain that consensus. They're concerned about this

16 issue. But I think if we take some time to walk them

17 through it and see what the options are, we can come back

18 with a solution that does both of those things.

19 BOARD MEMBER D'ADAMO: Would it need to be part

20 of the regulation, or could we just direct you to work

21 with the districts?

22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Probably

23 eventually we'll have to make it part of the regulation.

24 But I think we need to move ahead with today's action and

25 then follow up.

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 1 BOARD MEMBER RIORDAN: Mr. Chairman, I don't know

 2 if it would solve the problem, but could there be some

 3 sort of an issuance of a temporary sticker just as our

 4 cars has a little thing you tape on the window and say
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 5 it's good for X number of days, whatever the days are.

 6 And then at such a point, if that extends beyond and there

 7 becomes a problem or something, obviously they haven't

 8 been registered, you know, properly. But at least it

 9 would give them X number of days to operate. And they

10 would have something to show in case they were questioned.

11 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Well,

12 yes. We could certainly set up something like that in

13 working with CAPCOA and the stakeholders to look at that

14 option. I think, you know, issuing -- the difficulties

15 the districts have had and what we have been moving

16 towards is sort of the ability of the district to look at

17 an engine and know whether it's registration. You may

18 recall we required -- the new regulation requires a

19 four-by-six placard, something about that size, that's

20 green that has a sticker on it. And that's what takes a

21 little bit of time to process. But we can probably issue

22 a letter --

23 BOARD MEMBER RIORDAN: Just as a temporary

24 something that could be used to say, look, I'm in the

25 process of getting a permanent sticker. And expire it in

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 1 such a time that, you know, then you know you have a

 2 problem.

 3 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We
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 4 would probably look at something that would require

 5 expiration 90 days from the dates of application, because

 6 that's the length of time we have to issue a registration.

 7 BOARD MEMBER BERG: Mr. Chairman.

 8 CHAIRPERSON SAWYER: Yes.

 9 BOARD MEMBER BERG: When they submit their

10 application, there's a fee that also goes along with that?

11 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Yes.

12 BOARD MEMBER BERG: How long does it take us to

13 cash that check?

14 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I'll

15 defer to staff on that one.

16 RULE EVALUATION SECTION MANAGER GUZZETTA: The

17 program fees are accepted by the program staff and sent up

18 to the Administrative Services Division. So I don't know

19 how long it takes to cash the checks. Credit cards are

20 also accepted and processed within a week or so.

21 BOARD MEMBER BERG: So I just think that to

22 reiterate if we can cash the check that fast we could

23 probably get some sort of temporary registration out to

24 them so that they can use their equipment.

25 STATIONARY SOURCE DIVISION CHIEF FLETCHER: My

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 1 guess would be the checks are not cashed that quickly, but

 2 we have to check on it.
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 3 BOARD MEMBER BERG: I'm sure it's not 90 days.

 4 SUPERVISOR HILL: I was going to add, Mr. Chair,

 5 I just really support the idea of moving forward with some

 6 type of temporary registration or permitting to prohibit

 7 the use of that equipment. And if someone were going to

 8 violate whatever rules we have, they're going to use the

 9 equipment anyway regardless of whether they have a permit

10 or not. And I think this is good faith on both sides. So

11 I would hope you can do that.

12 CHAIRPERSON SAWYER: Thank you very much.

13 Mr. Davis.

14 MR. DAVIS: Good afternoon, Dr. Sawyer and

15 members of the Board.

16 If you could shuffle Mike Lewis' card down to the

17 bottom of the stack for being tardy, it would be

18 appreciated, since CIAQC does represent a large segment of

19 the industry.

20 The last time we met was to discuss these

21 proposed amendments in Bakersfield, we noted how thin your

22 ranks had become and quoted from Shakespeare Henry the 5th

23 about your happy few, your band of brothers. We welcomed

24 new members Supervisor Jerry Hill and Dr. Daniel Sperling

25 to the band and to our discussions with this industry.

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 1 Today, I'd like to use an example from Russian
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 2 history to put the current state of the portable

 3 regulations into perspective. And this is a perspective

 4 that might be shared by a great many of our friends in the

 5 environmental movement.

 6 In 1787, Prince Grigori Potemkin invited

 7 Catherine the Great on an imperial tour of the Ukraine and

 8 Crimea. They sailed on a barge down the Dnieper River to

 9 Sebastopol. Potemkin pointed out all the improvements

10 that he had built with happy villagers singing and waving

11 at the shore. All of this required a certain amount of

12 stage management. Orders went out to hide the beggers,

13 paint facades, and erect stage fronts to conceal the real

14 shacks along the river. Thus, was borne the expression

15 "Potemkin's village," using the Prince's name as a synonym

16 for the word sham, creating a public perception at odds

17 with reality.

18 We believe that the phrase "potemkin regulation"

19 aptly applies to the current state of regulation of

20 portable construction equipment in California. We think

21 you are the czar and czarinas being taken for a ride.

22 According to the Census Bureau, there are about

23 234,000 construction companies in the state. But

24 according to the economic impact analysis and the Initial

25 Statement of Reasons that's before you, only 22,046

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 1 private companies had registered -- I'm sorry. Only 2,246

 2 private companies had registered 22,097 pieces of

 3 equipment in the PERP. If only half of the 234,000

 4 construction companies in California owned only one piece

 5 of portable equipment, there would be more than 117,000

 6 pieces of equipment in the PERP, or should be. And

 7 construction is only one of 34 industries that's regulated

 8 under this rule.

 9 The economic impacts section of the ISOR says

10 that 10,000 older engines will be registered in the next

11 three years. We believe that number should be closer to

12 100,000. And given the characteristics of our industry,

13 we know at least two-thirds of those engines are going to

14 be Tier Zero. The ISOR estimates the registration cost to

15 the industry at $6.6 million for those 10,000 engines. If

16 the ratios hold, we think registration costs will be

17 closer to 67 million over the next three years, clearly

18 making this a major regulation under state law.

19 In December, we were told that the local

20 districts would allow registration of Tier Zero engines.

21 But again, reality is that none -- virtually none have

22 done so.

23 Given these Potemkin discrepancies, the

24 regulation will not achieve the goal of reducing emissions

25 on this equipment by ignoring reality. To regulate the

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 229

 1 equipment, you have to know where it is, who has it, and

 2 what they do with it. To do that, you must reopen the

 3 PERP, particularly to Tier Zero equipment. And although

 4 you have done a wonderful job in your outreach compared to

 5 previous efforts, you still have to continue it. One

 6 postcard does not a regulation make.

 7 Second, you must understand that you cannot

 8 replace more than 100,000 engines by imperial decree.

 9 Equipment manufacturers are licking their lips at the

10 opportunity to replace more than 100,000 California units.

11 But given their levels of production and global

12 competition for this equipment, it will take them at least

13 25 years to replace the fleet.

14 To give you a concrete example --

15 CHAIRPERSON SAWYER: I must ask you to conclude,

16 please.

17 MR. DAVIS: I have one final point.

18 The final point is that we remind the Board of

19 the first rule of the construction industry, which is

20 measure twice, cut once. We ask Dr. Sawyer that you

21 appoint a task force, a construction industry task force,

22 to do that work and that would include you, Dr. Sperling,

23 because of his extremely extensive knowledge on power

24 systems, the construction industry trade associations, the

25 construction equipment manufacturers who are never at the

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 230

 1 table on these things, CIAQC, and CAPCOA, and

 2 representatives from the environmental community. We hope

 3 this recommendation will meet with your approval.

 4 CHAIRPERSON SAWYER: Thank you.

 5 Does staff know what percentage of the

 6 construction equipment is under PERP versus local

 7 registration?

 8 RULE EVALUATION SECTION MANAGER GUZZETTA: Well,

 9 we currently have about 25,000 engines right now.

10 CHAIRPERSON SAWYER: In PERP?

11 RULE EVALUATION SECTION MANAGER GUZZETTA: In

12 PERP?

13 CHAIRPERSON SAWYER: Do we know how many the

14 districts have registered?

15 RULE EVALUATION SECTION MANAGER GUZZETTA: No. I

16 don't have that number.

17 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: I

18 think the last time we looked at this, and this was a

19 couple years ago, there was about 1,000, 2,000 engines

20 under district program. Some of those may still be there.

21 They may be in our program now. But it was a relatively

22 small number.

23 CHAIRPERSON SAWYER: So our program, indeed, is

24 population and seen as a value to the industry?

25 MR. DAVIS: One percent of the construction
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 1 companies.

 2 CHAIRPERSON SAWYER: Mr. Lewis, are you here now?

 3 No.

 4 Mr. Rudin.

 5 MR. RUDIN: Dr. Sawyer, Board members, my name is

 6 David Rudin. I work for Putzmeister, Inc. We manage

 7 diesel-powered trailer-mounted concrete pumps.

 8 One thing about going seventh, just about

 9 everything has been said I had to say.

10 But I was going to read a letter, but from Jim

11 Burry, whose is our Chief Engineer. Jim's letter points

12 out -- I am not going to read it, but Jim's letter points

13 out how confusing it is to register diesel engines with

14 regards to Section 3-A modifications to the statewide PERP

15 regulations. It's very confusing. We're trying to get --

16 since we found out less than a year ago that these engines

17 had to be registered, we had no clue there was a

18 requirement for registration until Amber Frey got a

19 citation. Since then, we've mailed, oh, letters and

20 postcards to people that use our equipment to let them

21 know this has to be done. All of them agree that if it's

22 got to be done, they're going to do. Nobody has said,

23 "Well, I am not going to register. If it's a rule, it's a

24 rule. They're going to do it."
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25 So I guess what I really want to do is just make

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 1 the PERP program permanent and not have it go away where

 2 these people don't get caught in this thing where they

 3 didn't know they had to register and the time frame

 4 expired. And so I just want to go on record saying we

 5 want to make PERP a permanent thing.

 6 And then to make it a little less confusing, if

 7 you had a Tier II engine, then you can register it. And

 8 you don't have to have a certain deadline or date or

 9 whatever. But if Jim Burry's letter, which he's our chief

10 engineer, it goes on to state that it's a little confusing

11 as to what tier level engine you can do, when you can do

12 it. If you bought it in 2006, you have until like April

13 of 2007. But you have to have a sales agreement dated

14 2006. And so if we just make it a little simpler, because

15 we're just construction people and we just like to keep

16 everything simple.

17 But I think so far everything is going pretty

18 nice. You guys have been pretty good about this. That's

19 about all I have to say.

20 CHAIRPERSON SAWYER: Thank you very much. We

21 certainly look to the people in your industry to help in

22 notifying the buyers what the requirements are. That's an

23 awfully good place to get the information out.
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24 MR. RUDIN: One last thing. We have a factory

25 store in southern California and I have a dealer up here

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 1 in the bay area. Can we register these pumps with you and

 2 then we sell them? I've got probably 15 units in stock in

 3 southern California. They're not sold to anybody yet.

 4 But I'd like to be able to register them, have them

 5 registered. And then as we sell them, when the guy signs

 6 them, give him his badge and say that will be whatever it

 7 is? And that way he don't have to worry about it for

 8 three years.

 9 CHAIRPERSON SAWYER: The answer would be yes.

10 And that would be a tremendous service to everybody.

11 MR. RUDIN: I know all the other pump

12 manufacturers would be happy to do that.

13 BOARD MEMBER RIORDAN: We wish that would happen

14 in the whole industry. That would be great.

15 MR. RUDIN: It would be so much easier going to

16 your car. You don't go get a car and then have to get the

17 license places later. If we have that ability, it would

18 help us a lot. Thank you.

19 CHAIRPERSON SAWYER: Thank you.

20 Mr. Lind. And then we'll have Linus Farias, Seth

21 Hammond, and Howard Cooper.

22 MR. LIND: Thank you, Mr. Chair and members of
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23 the Board. My name is Allan Lind, and I'm here on behalf

24 of the California Council for Environmental and Economic

25 Balance.

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 1 I, of course, want to commend your staff for

 2 working on an extremely and exceedingly complex issue

 3 here, very difficult and complex issue. We're very

 4 appreciative of the flexibility provisions the staff has

 5 built into the regulations.

 6 We're here to convey our strong support for the

 7 extension of the emergency regulations with the amendments

 8 that staff has proposed.

 9 I do recognize that you have two issues before

10 you. And I'm not sure if you really intend on bifurcating

11 them. But so I'm going to suggest that you give

12 consideration to a slight delay and the adoption of the

13 permanent regulations to take into consideration certainly

14 some of the comments I think very poignant and very

15 correct comments made by the speakers before me.

16 And then a topic that we'd like to bring up that

17 I don't believe has been discussed before and the topic

18 deals with emergency low-use engines. And the reason

19 we're bringing it up now is that frankly it wasn't until

20 the February 2nd version of the staff amendments that it

21 became apparent to us that we feel there's an internal
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22 inconsistency in the regulations. And Linus is going to

23 be able to do a much better job of explaining that

24 internal inconsistency. But what I can tell you in brief

25 it has the effect of allowing Tier Zero engines to operate

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 1 in the case of an emergency under a low-use permit, but

 2 better quality equipment, certified equipment that is

 3 domiciled out of state in Nevada or Arizona or Oregon,

 4 because it's being domiciled in other locations.

 5 The reason that's important is of the members in

 6 CCEEB are utilities in particular. And in particular,

 7 telecommunication utilities face different kinds of

 8 threats or disasters, if you will, that the emergency

 9 rules are intended to provide for. I think that the

10 emergency rule was written with the notion in mind of

11 natural disasters: Flood, famine, pestilence, and

12 earthquakes, and matters such as that. It does provide

13 for other events which is maybe a euphemism for terrorism

14 attacks or computer hacking that gets into systems that

15 disrupts telecommunications or utility services is

16 generally and broadly. And those are really not well

17 addressed in the regulations.

18 I guess I'd like to emphasize that the

19 telecommunications industry and for that matter all of the

20 power utilities are in the business of trying to prevent
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21 threats. And the rules don't go to the prevention of a

22 threat. They go to the response to an actual disaster.

23 Telecommunications, especially if you're a

24 nationwide corporation, has a threat risk that sometimes

25 transcends borders or it may effect the western states.

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 1 Or if I may, if you have a data center or

 2 telecommunications center on the east coast that's been

 3 sabotaged for one reason or another, let's say it happened

 4 to be a terrorist related action, does that pose a threat

 5 to the same kind of facilities on the west coast? We

 6 would argue it does. But that isn't an actual disaster or

 7 activity that's occurring in California.

 8 So when the utilities like AT&T or other major

 9 telecommunications corporations plan for disasters and

10 plan for the prevention of disasters, they plan on a

11 national level. And if there are activities going on that

12 deployment of their back-up equipment which is disbursed

13 across the United States has to be accomplished very

14 strategically. When we have a flood in -- a hurricane in

15 Louisiana, the state of California sends its rescue people

16 to Louisiana. They don't have to have a certificate to

17 get in. If there's a hurricane in Florida, we do the same

18 thing with our rescue people. If there's a fire in New

19 York City, we send our fire fighters there.
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20 What we need is the ability to bring in emergency

21 back-up equipment into California in case of an emergency

22 or a threat of an emergency that may not meet the

23 definitions that the staff has for a natural disaster.

24 For that reason, we're seeking some accommodation on that

25 definition of natural disaster and then the accommodation

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 1 of back-up equipment that may be coming from Nevada but

 2 might be a Tier I or Tier II piece of equipment that would

 3 be operating cleaner than Tier Zero that's a resident in

 4 California and that would be permitted to be operated

 5 under the current rules. So we see this as an internal

 6 inconsistency.

 7 EXECUTIVE OFFICER WITHERSPOON: I'd like to

 8 address a question to our General Counsel about authority

 9 to respond to emergencies outside of regulations, because

10 I hazard to guess it's difficult to write in a regulation

11 every kind of emergency. But in the wake of Katrina, as

12 one example, the Air Board immediately suspended portions

13 of our fuel regulations because of supply disruptions far

14 to the east of us. And I suspect we have that ability to

15 act on the spot within hours to any other kind of

16 emergency of that scale.

17 But, Tom, could you speak to that?

18 CHIEF COUNSEL JENNINGS: Well, with Hurricane
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19 Katrina, we did adopt emergency regulations to delay the

20 RVP reg for the lot of two months of the RVP season for

21 gasoline.

22 There have been times in emergency situations

23 where as a matter of enforcement discretion we have

24 allowed certain things to allow gasoline to be brought in

25 in ways where there were no options.

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 1 But I would say to the extent that it can be

 2 anticipated and articulated, it certainly is a useful

 3 exercise to try to identify when you're going to do that

 4 and under what circumstances.

 5 BOARD MEMBER RIORDAN: Mr. Chairman, it occurred

 6 to me I don't think you need to delay as the speaker

 7 mentioned. But couldn't it be done maybe in a 15-day

 8 change? I think there is some wordsmithing that might go

 9 on that could accommodate some of the thoughts that you

10 advance. I don't know that all can be taken care of, but

11 I think some of it.

12 MR. LIND: We did submit a letter to the Board

13 and suggested some language that we think is making a

14 modification to a particulate paragraph. We have one

15 paragraph in the regulation, and we bifurcated it into two

16 paragraphs to allow under certain circumstances the use of

17 one non-resident emergency equipment under the PERP --
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18 under the statewide program. So that it's certainly not a

19 difficult challenge to wordsmith this. And if the Board

20 will accommodate us, we're happy to work with the staff in

21 wordsmithing that to ensure that we're not precluding an

22 important piece of emergency back-up equipment at the

23 border of the state of California because it doesn't have

24 a green card. Excuse the imagery there, but that's

25 something that we're just trying to avoid.

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 1 Frankly, I think if staff is correct, then the

 2 modifications we're proposing would have no effect at all.

 3 Because it will be a no harm, no foul situation. But if

 4 the staff is not correct or if we are unable to anticipate

 5 those more exotic threats and unpredictable kinds of

 6 threats to the nation's data centers to the state of

 7 California's data centers and telecommunication centers, I

 8 think it's in our best interest, I think it's our

 9 obligation and responsibility to ensure that those systems

10 remain vital so that the people who live in remote areas

11 can call for help if they need help, so we can communicate

12 amongst our law enforcement officials, to communicate

13 between the hospital and the public safety organizations.

14 So I think that the changes that were -- we're

15 not entirely sure we were precluded in the January

16 version, but the February version caught us a little off
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17 guard, put a chill into our interpretation of the

18 regulations. And we would really like to see that

19 remedied.

20 CHAIRPERSON SAWYER: I think as a general

21 guideline to the staff, we want to be able to respond to

22 emergency situations, and we don't want our rules to

23 prevent response.

24 EXECUTIVE OFFICER WITHERSPOON: Of course not.

25 CHAIRPERSON SAWYER: This has come up before in

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 1 other issues dealing with bird flu for example was the

 2 first one that hit me on the job.

 3 EXECUTIVE OFFICER WITHERSPOON: The only issue is

 4 time to work with CAPCOA and also the one phrase that Mr.

 5 Lind used at the mike that made me pause was "the threat

 6 of an emergency." We'll know when an emergency is upon

 7 us. But this sort of in between category we want to bring

 8 in equipment because something might happen, a storm might

 9 hit, those sorts of things, and what is that equipment

10 doing while it's waiting. We have to work out those kinds

11 of issues. It's a little more complicated. We'll

12 certainly take a crack at it.

13 STATIONARY SOURCE DIVISION CHIEF FLETCHER: If I

14 could also comment that there is provisions in the

15 regulation now for natural disaster all bets are off.
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16 They can bring in any equipment they want if it's truly a

17 natural disaster. I think difficulty here is exactly what

18 Katherine identified is a cell phone tower going down in

19 an emergency in a normal situation. And I think we would

20 have difficulty in actually defining and sort of narrowly

21 scoping out what in fact they believe is an emergency

22 versus what is truly an emergency where we have already

23 carved out the concept of natural disasters and would

24 allow non-resident engines to come in.

25 SUPERVISOR HILL: Mr. Chairman, isn't that

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 1 sometime defined by a declaration of emergency by the

 2 local jurisdiction or the Governor?

 3 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I

 4 think that's true and consistent with our definition in

 5 the regulation. But I think that what the gentleman is

 6 requesting is greater flexibility on the threat of an

 7 emergency as opposed to an actual emergency.

 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I don't think

 9 we understand exactly what situations we're trying to

10 address, so we need to understand that and see if we can

11 make a simple change in the regulation and do it quickly.

12 It just implements our intention.

13 And the second thing is if we're hit with a real

14 emergency, we know we can have extraordinary powers and
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15 use them quite quickly in order to modify the regulations

16 so that the things that we do don't get in the way of

17 responding to a much bigger problem.

18 MR. LIND: If I may, I want to just re-enforce

19 that we're just trying to avoid the law of unintended

20 consequences, because we know your staff is very

21 determined and dedicated to preventing the law of

22 unintended consequences from occurring here. We just see

23 it as we read it handicapping the ability to provide the

24 protections for the systems that the major utilities have

25 to rely on to provide not only telecommunications but

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 1 other energy services frankly throughout the western

 2 states. And if there is a strategic disaster, if you

 3 will, that's in the western states, you're going to have

 4 every state in the western states competing for the same

 5 kinds of equipment and the deployment of that equipment.

 6 Let's say it starts in Colorado and AT&A ships

 7 its California equipment to Colorado to address certain

 8 kinds of problems there and it spreads to California, we

 9 may not have the ability to bring in the equipment in

10 Nevada or Oregon or Arizona because of the way this

11 language is currently drafted. And these threats are not

12 also published on the front of the newspaper. If the

13 National Security Administration is telling us you're
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14 vulnerable, we've got to respond.

15 STATIONARY SOURCE DIVISION CHIEF FLETCHER:

16 There's one other comment I'd like to make. And that is

17 we need to check with counsel and make sure this change

18 would be within the scope of the note that was issued.

19 Because this is a provision that has not been changed

20 either in the emergency in December or in this rulemaking.

21 So we just need to confirm that if we were going to make a

22 change that we can do so within the scope of the notice.

23 MR. LIND: I'll tell you what. We're responding

24 to the language changes that occurred if the February 2nd

25 version and there was language in the January version that

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 1 was changed at the request of industry that we were

 2 supportive of. So it's migrated one step forward, and we

 3 think it's two steps backward.

 4 EXECUTIVE OFFICER WITHERSPOON: We'll work on it.

 5 CHAIRPERSON SAWYER: Thank you for bringing it to

 6 our attention.

 7 Mr. Farias.

 8 MR. FARIAS: Good afternoon, Chairman Sawyer,

 9 members of the Board. I'm Linus Farias. I'm with AT&T, a

10 member of CCEEB. And Mr. Lind very clearly elucidated our

11 issues.

12 One item I would like to reiterate is the nature
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13 of the units we're talking about here. These are portable

14 engines that are typically low use but are used in

15 emergencies. We're talking about using these well under

16 50 hours a year. These units have long lives as a result.

17 And the flexibility we would have that we are asking for

18 really addresses these low-use units, not the ones that

19 are typically used across the PERP program which are

20 estimated to be running about 450 hours a year.

21 So I would like to just reiterate that. And I

22 would recommend that with the language that we have

23 proposed, that would address these low-use units for both

24 my company as well as other CCEEB members, other

25 organizations that have similar situations. Thank you.

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 1 CHAIRPERSON SAWYER: Thank you very much.

 2 Mr. Hammond.

 3 MR. HAMMOND: Good afternoon, Dr. Sawyer and

 4 members of the Board. I'm Seth Hammond. I'm from

 5 Specialty Crane and Rigging. I'm here today representing

 6 the approximately 20 southern and northern California

 7 crane owners. And I was really happy to see the comments

 8 on the board up there that came from our meeting that we

 9 attended in Bakersfield on December 7th when there was

10 direction given to staff to see if we could work together

11 to formulate a plan. And I'm very, very happy to tell you
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12 that we had our first meeting on the 13th here in this

13 office in this building with Bob Fletcher and Mike

14 Tollstrup to try to work these issues out.

15 I feel very comfortable we're going to come to a

16 resolve that's going to be beneficial for everybody. And

17 as I like to refer to it, we're going to hopefully protect

18 an endangered species here. Because as you people know,

19 the cranes are very important for maintaining the

20 infrastructure or repairing the infrastructure. And

21 whether it's our harbors or freeways or our public

22 transportation, the cranes are very important. And we

23 need to take a special look at them.

24 So I'm happy to report our first meeting was

25 successful and look forward to more meetings. Thank you

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 1 very much.

 2 CHAIRPERSON SAWYER: Thank you very much.

 3 Mr. Cooper.

 4 MR. COOPER: Well, I come to this meeting with

 5 more questions than I had comments. But I understand the

 6 agenda for this is different than I thought it was going

 7 to be.

 8 I belong to a crane company. We have large

 9 cranes that do pile driving mostly. And most of our upper

10 engines for our truck cranes are Tier Zero engines. And
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11 the cost on these is not like replacing a welder or

12 generator. And so most of my comments are on that. And

13 the gentleman just before me said that they are trying to

14 get I guess a exemption for the cranes.

15 The other comment I had was that we do pile

16 driving. And to my knowledge -- and I just found out that

17 the pile driving equipment is under the portable engines.

18 And to my knowledge, there is no Tier II, Tier I, or Tier

19 III coming up for that. So I'd like to know about how

20 we're going to have to register those. And since there is

21 no more updated equipment for those, what is the Board

22 going to be able to do about that.

23 AIR RESOURCES ENGINEER GORMLEY: I can answer

24 that. Pile drivers are currently eligibility in PERP, and

25 there is no restrictions on their eligibility.

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 1 MR. COOPER: So we can --

 2 AIR RESOURCES ENGINEER GORMLEY: We have several

 3 registered and we continue to accept them.

 4 MR. COOPER: And I guess the new thing coming up

 5 is we're going to have to run kerosene and special oils.

 6 AIR RESOURCES ENGINEER GORMLEY: We don't have

 7 any restrictions on that.

 8 MR. COOPER: Okay. Thank you.

 9 CHAIRPERSON SAWYER: Thank you very much.
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10 Yes, Ms. D'Adamo.

11 BOARD MEMBER D'ADAMO: Mr. Chairman, I just want

12 to make sure we don't leave the witness with the wrong

13 impression. He referred to an exemption for the cranes.

14 And I suspect that that's not what staff is working out.

15 So I just want to make sure he leaves with the correct

16 understanding of where you're headed.

17 EXECUTIVE OFFICER WITHERSPOON: We're working to

18 understand the unique issues that face cranes and what the

19 most appropriate requirements for them would be. It's

20 still a fact-finding exercise. We haven't gotten to the

21 bottom of it. So we don't know yet what the form of the

22 regulation will take. But you're correct. It won't be an

23 exemption. It will be tailored to the crane industry if

24 we decide in the end that they need different treatment

25 than the rest of the portable engines.

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 1 CHAIRPERSON SAWYER: Our next three speakers will

 2 be Alvan Gangalindan, Doug Korthof, and Dan Dresser.

 3 Mr. Gangalindan.

 4 MR. MANGALINDAN: Chairman Sawyer, members of the

 5 Board, my name is Alvan Mangalindan. I am with the Crane

 6 Owners Association, an industry association comprised of

 7 crane rental contractors based out of northern California.

 8 Under PERP, unregistered engines would be subject
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 9 to penalty fees under the notion that such equipment had

10 been operating in violation of current district permit

11 requirements. This, however, is not the case for our

12 members. Indeed, Bay Area Air Quality Management

13 District, an existing exemption does exist that does not

14 require a permit for portable engines where the engine

15 operates at a given location for less than 72 hours. It

16 is deemed special construction equipment under the Vehicle

17 Code, performs road construction, or performs building

18 construction. As a result of this exemption, our

19 association and its members respectfully request that no

20 penalties be assessed under PERP for portable engines in

21 the Bay Area. Thank you.

22 CHAIRPERSON SAWYER: This applies specifically to

23 cranes?

24 MR. MANGALINDAN: Portable engines.

25 CHAIRPERSON SAWYER: Entirely?

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 1 MR. MANGALINDAN: Yes.

 2 CHAIRPERSON SAWYER: Staff want to comment?

 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, we

 4 don't require people to come and get permits with the

 5 statewide program. And if the local district doesn't

 6 require permits, they've been operating under that, I

 7 believe they're free to continue to operate that way.
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 8 In terms of whether or not, you know, they want

 9 to come into the program, I guess we'd have to determine

10 if in the past they were in an area where the district

11 didn't require them to get the permits. And I think they

12 get a different treatment under what we proposed than if

13 they were in a district where they did require permits and

14 now are trying to get into PERP so they resolve their past

15 situation.

16 EXECUTIVE OFFICER WITHERSPOON: But PERP lets you

17 operate anywhere. That's the other aspect of the

18 registration program.

19 CHAIRPERSON SAWYER: Thank you very much.

20 Mr. Korthof.

21 MR. KORTHOF: Hi. Doug Korthof from Seal Beach.

22 I'm generally against these regulations because

23 they're a distraction. And as Plato -- since we've had

24 Lincoln and Potemkin, let me quote Plato. Plato says in

25 in his primordial statement of the incompleteness that any

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 1 system of laws and regulations that's complex enough to

 2 represent basic arithmetic is also going to have things

 3 true about it that are not provable within it. Meaning

 4 there's always loopholes around loopholes around

 5 loopholes. The more complicated we get, the more

 6 restrictions that are unnecessary that we place on actual
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 7 things that happen.

 8 Missing the big elephant in the room, the less

 9 we're going to actually accomplish. The big elephant in

10 the room, of course, is refinery and car emissions, single

11 person commuting in big cities. That's what we have to

12 deal with. If we deal with that, then these issues of off

13 road and construction equipment are all of a sudden not so

14 important. We don't have to spend huge pages of dollar a

15 page reports dealing with these. And we don't have to

16 have hundreds of people bothered with this stuff. They

17 could be out working for a living helping to pay for this.

18 So I did want to comment that a lot of the

19 alarmist stuff like going out of business and leaving

20 California because of all the jobs, we know that's hokum

21 and bunkum. I wish the construction industry hadn't said

22 that. Because as we know -- I don't think they should be

23 subject to these regulations because they're not

24 responsible for air pollution. But as we know, all these

25 costs are passed onto the user. The cost of new

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 1 construction of houses has nothing or very little to do

 2 with the cost of actually building the house. Most of

 3 it's land use and regulations and what the market will

 4 bear. I think the alarmism is not necessary. But I do

 5 think we should do much, much less of these regulations on
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 6 people that actually do something for a living.

 7 CHAIRPERSON SAWYER: Mr. Dresser. And then Doug

 8 Van Allen, James Thomas, and Danny Luong.

 9 MR. DRESSER: Members of the Board, good

10 afternoon. My name is Dan Dresser, and I'm employed by a

11 company called ARB, not to be confused with you, unless

12 that exempts us from the program. We are general

13 contractors, perform engineering and utility

14 infrastructure work, pipeline type work. Employ about

15 1500 people this year.

16 The cost to upgrade our fleet, which would be

17 about half of it, to get it to the Tier III status would

18 be about $15 million. So I've heard some statistics

19 earlier of what the overall industry was going to be.

20 That's what I got from the equipment department, if it can

21 even be done. I hear the request from the crane people.

22 We also have speciality equipment that's low use. Side

23 booms or a tractor that lifts the pipe up, and there's not

24 very many hours used per year. But it's all Tier Zero.

25 In our competitive world, it's doubtful we're

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 1 going to be able to pass these costs onto our clients. So

 2 I would ask that in addition to passing your emergency

 3 resolution, you consider the Tier Zero inclusion in the

 4 overall. And if there is some kind of a special category
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 5 that can include some type of definition for lower use

 6 equipment, that would be great. Thank you.

 7 CHAIRPERSON SAWYER: Thank you.

 8 Mr. Van Allen.

 9 MR. VAN ALLEN: Dr. Sawyer and staff, my name is

10 Doug Van Allen. I represent BJ Services. We're a high

11 pressure pumping service for the oil field industry.

12 Back when PERP started, I actually had hair. So

13 we've been doing this a long time. Some of your staff

14 remember me from back then. But one of the things that

15 listening to the people are coming up talking, this isn't

16 a new program. You know, it's been in effect since '97.

17 And I've heard them bash your staff about this morning

18 about we didn't notify everybody. Some of the things that

19 they're not remembering is when PERP started in 1997 this

20 is a voluntary program. It's not a mandated program.

21 The reason it got started was because of the

22 local Air Boards and CAPCOA mandated we had to permit our

23 engines. And at that time, I had engines that were

24 permitted in six different air districts for the same

25 engine. And they could only operate one at a time. So we

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 1 got together. They had AB 531, mandated we put together a

 2 statewide program. And that's what we did.

 3 Well, all of these Tier Zero engines and a lot of
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 4 the other engines, it's not staff's fault that they

 5 weren't permitted. It's the local Air Board's fault for

 6 not pursuing them. They should have been permitted. And

 7 if they were permitted as a Tier Zero engine in a local

 8 district, they could come into the program now. So I

 9 mean, that's an issue that people aren't thinking about.

10 They're blaming your staff for what's going on.

11 The PERP program has been a really good program.

12 It allows us to move all over the state of California to

13 work. And it lowered our operating costs by being able to

14 buy one permit, operate everywhere.

15 BJ has been replacing engines since 1997 in order

16 to meet the 2010 deadline. And we appreciate the

17 opportunity to do that. We think the emergency amendment

18 has allowed many engines that were unpermitted or

19 unregistered to be able to come into the program and get

20 them in a program. At lease now we know where they're at.

21 And their emissions can be qualified. We encourage you to

22 adopt the amendment today as it's presented to you. And I

23 thank you for the opportunity to have input on this

24 subject.

25 CHAIRPERSON SAWYER: Thank you very much.

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 1 BOARD MEMBER RIORDAN: Mr. Chairman, just to the

 2 speaker, thank you. Because the history is important,
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 3 because the history was to help those of you who had this

 4 equipment that wanted to move throughout the state of

 5 California and couldn't, you know, get those individual

 6 permits in a timely way to allow you to function. And I

 7 can remember way back when when this was going on. So I

 8 thank you for the bit of history that we need to all

 9 remember.

10 MR. VAN ALLEN: Thank you.

11 CHAIRPERSON SAWYER: Mr. Thomas.

12 MR. THOMAS: Good afternoon Mr. Chairman and

13 Board members. I'm James Thomas with Nabors Well Services

14 out of Bakersfield, California. We have work over rigs.

15 I've testified many times about the portable

16 equipment, the PERP regs, and the portable equipment ATCM.

17 I have worked on the PERP reg for 14 years. I have rode

18 with Doug to Sacramento several times. We have attended

19 workshops that we can't count anymore because there have

20 been so many of them.

21 Like Doug mentioned about the history, I'd like

22 to mention one other thing. This regulation if you had a

23 portable equipment and it was operating in South Coast

24 AQMD, you had to have a permit in 1985. So if someone has

25 an engine that's operating in South Coast and they said

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 1 they didn't know the regs, they haven't known the regs
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 2 since 1985. That's a long time.

 3 A lot of people raise concerns about getting into

 4 the portable equipment program and the outreach. CARB

 5 staff was directed to develop an emergency amendment to

 6 the portable equipment and the portable ATCM. And, of

 7 course, this is a very complex issue. And CARB had to

 8 balance a regulation in an emergency atmosphere to take

 9 care and give options to people that are both inside and

10 outside of the program. I believe that they have done the

11 best they possibly could with the regs they have. I do

12 support it.

13 I'd like to say that the outreach is working,

14 because last week I had a workshop that I talked about the

15 new changes to the portable equipment to people in our

16 industry. I also talked about the off-road ATCM. Since

17 I've been involved with the program PERP for so long, an

18 angel vigil brought me up this letter. And it's from

19 CARB. And it states all the provisions that are in the

20 emergency PERP reg. So I didn't get this letter. I got

21 the card, but I didn't get this letter. This individual

22 had never received a communication from CARB, and he got

23 this letter. So the outreach is working.

24 I ask that you adopt the -- to make permanent the

25 emergency regs that we have. And I ask one favor: That

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 1 maybe today we can adopt this and close PERP for once and

 2 for all. Fourteen years is a long time.

 3 CHAIRPERSON SAWYER: Thank you very much.

 4 Mr. Luong.

 5 MR. LUONG: Good afternoon, Chairman Sawyer and

 6 members of the Board. I'm Danny Luong. I'm a Senior

 7 Enforcement Manager from the South Coast Air Quality

 8 Management District.

 9 We at the South Coast have been actively

10 participating with this amendment. And we have formed a

11 new unit to implement this provision, and I'm in charge of

12 that operation.

13 As you know, the residents of South Coast air

14 basin breathe the worst air in the country, and this

15 morning you heard there is serious PM problems in the

16 basin. So I'm here to urge you to adopt the amendment as

17 it is, reject the Tier Zero engines because to allow them

18 in would trump our efforts in reducing those emissions in

19 the South Coast.

20 And finally, we want to thank the staff of the

21 ARB to work with us to develop this amendment. And the

22 outreach as you heard is working, and we will support the

23 program and help it be successful. And thank you for the

24 opportunity to address the Board.

25 CHAIRPERSON SAWYER: Thank you.

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 1 BOARD MEMBER BERG: Mr. Chairman, could I ask a

 2 quick question?

 3 Sir, we've heard some testimony that there's a

 4 small percentage of equipment that's being registered.

 5 Can you speak to South Coast Air Quality if you feel that

 6 the equipment in South Coast Air Quality is either

 7 registered in South Coast or in the PERP program and what

 8 enforcement, if any, are you doing?

 9 MR. LUONG: We have been looking at various

10 operations and see whether or not they have some portable

11 engines. What we have found out is that what we found

12 that mostly have either a permit or a PERP registration,

13 but we certainly have not covered a whole area. We have

14 seen some that are not permitted, and we have taken

15 actions for that. But as percentage, I don't have a good

16 number. We didn't look at how many there are out there.

17 BOARD MEMBER RIORDAN: May I just ask to follow

18 along, how many engines do you have registered in your

19 program, ballpark?

20 MR. LUONG: I couldn't begin to guess.

21 BOARD MEMBER RIORDAN: Hundreds? Thousands?

22 MR. LUONG: It should be in the thousand range.

23 Not many thousands, but probably a thousand.

24 BOARD MEMBER RIORDAN: Thank you.

25 CHAIRPERSON SAWYER: Mr. Lewis.

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 1 MR. LEWIS: Thank you. My name is Mike Lewis.

 2 I'm the Senior Vice President of the Construction Industry

 3 Air Quality Coalition.

 4 And I wanted to speak to you briefly today about

 5 reopening this program for the Tier Zero equipment. And I

 6 do so because I think in the construction industry 55

 7 percent of the construction companies in California have

 8 fewer than five employees. 75 percent have fewer than ten

 9 employees. And 97 percent of them have less than $10

10 million in annual revenue.

11 The companies that are most affected by your

12 provision to ban if you will the Tier Zero equipment that

13 wasn't already in the PERP program and places an undue

14 hardship on those companies because they have no option

15 right now. And I sense initial action was taken in June

16 and the subsequent emergency action was taken in December.

17 I've had I can't tell you how many phone calls from

18 contractors all over the state asking me what do I do.

19 And the only advice I can give them is your equipment is

20 illegal. It's illegal for you to operate in the state of

21 California. Your only hope is to go and get a permit from

22 a local district and I can tell you right now virtually

23 none of the local districts are going to permit this

24 equipment. We've surveyed them all. There have been very

25 few if any permits issued in the three months that the
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 1 program -- the option has been available.

 2 And I think based on my own calculations of

 3 equipment that's in the program versus not in the past,

 4 I'm guessing that there's about -- I understand there's

 5 about 6200 Tier Zero engines in the program now. I'm

 6 guessing there's that many or twice that many that are not

 7 in the program simply because they didn't know about it.

 8 And I think to tell those people that their equipment is

 9 illegal because they didn't get in a program that they

10 didn't know about is very unfair. I think in fairness to

11 the people who did find out about it and got in it, the

12 Tier Zeros who are not in it maybe should be given less

13 time to come into compliance, maybe by the end of 2008

14 instead of the end of 2009.

15 But I think there are literally thousands of mom

16 and pop family-run businesses who have equipment who are

17 now illegal in the state of California. And they have no

18 option but to go buy new equipment or go out of business.

19 For most of them, going out of business is the only

20 option. And it's the only livelihood they have.

21 And I can tell you from the telephone calls that

22 I've been taking in the last three months, most of those

23 people are continuing to operate. And they're going to

24 continue to operate until they get caught because they
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25 don't have any choice. So I would ask you to please

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 1 reconsider allowing them back into the program, giving

 2 them the opportunity to register, shortening the period of

 3 time they have to turn that equipment over. But having

 4 them operate illegally is not appropriate. They're not

 5 going to be found in all likelihood. This program has

 6 been in place for ten years. They weren't found in that

 7 period of time. The ATCM has been in place for three

 8 years. They weren't found in that period of time. We

 9 don't think most of them are going to get caught before

10 the 2010 deadline anyway. And we might as well get them

11 in the program so we know where they are and what they're

12 doing. Thanks.

13 CHAIRPERSON SAWYER: Thank you.

14 Ms. Witherspoon, does staff have any further

15 comments?

16 EXECUTIVE OFFICER WITHERSPOON: Only in response

17 to Board questions.

18 CHAIRPERSON SAWYER: Are there any questions for

19 staff?

20 I now close the record on both of these items.

21 However, for the permanent amendments to the PERP

22 regulation and the airborne toxic control measure for

23 diesel-fueled portable engine, the record will be reopened
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24 when the 15-day Notice of Public Availability is issued.

25 Written or oral comments received after this hearing date

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 1 but before the 15-day notice is issued will not be

 2 accepted as part of the official record on the agenda

 3 item.

 4 When the record is reopened for a 15-day comment

 5 period, the public may submit written comments on the

 6 proposed changes which will be considered and responded to

 7 in the Final Statement of Reasons for the regulation.

 8 Are there any ex parte communications that Board

 9 members need to disclose?

10 I was contacted on the 21st the March by Senator

11 Dave Cox by phone, and I discussed with him pretty much

12 the issues that were raised by the rental industry. And

13 what we heard from them today was what he discussed with

14 me.

15 Ms. Riordan.

16 BOARD MEMBER RIORDAN: I have none, Mr. Chairman.

17 CHAIRPERSON SAWYER: No. No. Supervisor

18 Roberts, no.

19 The Board has before it two resolutions to

20 consider. First, Resolution Number 7-9 regarding the

21 permanent amendments to the PERP regulations and the ATCM.

22 Do I have a motion to adopt?
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23 BOARD MEMBER D'ADAMO: So moved.

24 SUPERVISOR HILL: Second.

25 Mr. Chair, if I could, for the record I want to

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 1 state that I did review the transcript of the previous

 2 record of this item before the Board.

 3 CHAIRPERSON SAWYER: Thank you very much for

 4 doing that.

 5 All those in favor please indicate by saying aye.

 6 (Ayes)

 7 CHAIRPERSON SAWYER: Opposed?

 8 It's carried. Now resolution 7-10 adopting the

 9 emergency amendments, the bridging amendments. Do I have

10 a motion to adopt?

11 BOARD MEMBER RIORDAN: I would move approval, Mr.

12 Chairman.

13 CHAIRPERSON SAWYER: And a second?

14 BOARD MEMBER D'ADAMO: Second.

15 CHAIRPERSON SAWYER: Is there any further

16 discussion?

17 If not, all those in favor please indicate by

18 saying aye.

19 (Ayes)

20 CHAIRPERSON SAWYER: Opposed?

21 Motion is carried. At this time we provide an
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22 opportunity for Board members to comment on matters of

23 interest. You may identify matters you would like noticed

24 for consideration at future meetings and comment on topics

25 of interest. No formal action on these topics will be

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 1 taken without further notice.

 2 Do any Board members have anything they'd like to

 3 bring up at this time?

 4 SUPERVISOR HILL: Mr. Chair, if I could. You

 5 were kind enough earlier to mention the statement of

 6 principles regarding AB 32 coming back to the Board, and I

 7 was reminded of the letter from the environmental

 8 community which discussed some statement of principles and

 9 early action for AB 32. I was wondering if we could get a

10 staff response to that letter at some point and to those

11 earlier action items. And that may be addressed in the

12 statement of principles that you're talking about.

13 EXECUTIVE OFFICER WITHERSPOON: It will be

14 addressed a bit, but there's a separate process going on

15 on earlier action measures. We held one public workshop.

16 We're about to release a revised staff report on April

17 13th. We're going to have a second public workshop on

18 April 23rd which we'll be able to tell you about at the

19 April Board meeting. And then we're bringing the early

20 action measures to you at your June Board meeting, the day
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21 before the South Coast plan. So, yes, it all is

22 connected, but they're running alongside each other.

23 SUPERVISOR HILL: I guess the concern is the

24 number of early action items.

25 EXECUTIVE OFFICER WITHERSPOON: They gave us 60

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 1 proposals at least. And in the report that we're issuing

 2 on April 13th, we will do an executive summary and

 3 multiple tables indicating the disposition of each of

 4 those recommendations, where we have embraced them, where

 5 we have referred them to other agencies who are

 6 responsible for that area, where they require subsidies or

 7 legislation we don't have at the moment, where they take a

 8 little more development and might need to go forward into

 9 our comprehensive plan but aren't ready quite yet for

10 adoption as an early action measure. We'll describe all

11 of that. And then we'll bring it to you after the public

12 has had more time to react to our current thinking.

13 SUPERVISOR HILL: Thank you.

14 CHAIRPERSON SAWYER: We now have our open comment

15 period for the public. I have three requests: Doug

16 Korthof, Deborah Whitman, and Bill Davis. Mr. Korthof.

17 MR. KORTHOF: So I'm one of hundreds of electric

18 car drivers driving the nickel metal hydroid zero-emission

19 vehicle Toyota RAV 4 EV that's been on the road since
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20 2002. Driving this car has helped finance my solar system

21 and actually completely paid it off. I still donate extra

22 money to the grid every year. And my charging in my

23 electric car helps the grid by raising the nighttime low

24 point. And my solar system lowers the daytime peaks. And

25 right now I'm powering my neighbor's system.

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 1 A lot of other people would like to do this same

 2 thing, electric vehicles photovoltaic, EVPV. And this is

 3 the truth. You know, the truth is simple. Complexity,

 4 once you get into complexity, you have confusion.

 5 I want to review the progress on the hydrogen

 6 highway. When they killed -- the ARB allowed the crushing

 7 of electric cars back in 2003, March of 2003 and April,

 8 because they weren't willing to sit there and kill the

 9 regulation when there were electric car drivers sitting in

10 the audience. They instead postponed it for the next

11 month when nobody would be there because there was no

12 public comment.

13 There were about 3,000 electric cars on the road

14 at that time. Now there's 93 fuel cell vehicles in

15 California and all the manufacturers in full compliance.

16 This document in 2004 was the hydrogen highway document.

17 Now we're already overrunning the bullet points in here.

18 Okay. What has happened? 93 versus 3,000, not so good.
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19 What about the fueling stations in the so-called

20 hydrogen highway? They declared the hydrogen highway

21 nothing much has been done. The fuel cell funding is a

22 million dollars per fuel station.

23 What about electric cars? We plug with a $5

24 plug. Some people haul around a $3,000 charging device

25 which they plug into a $5 plug. Whereas, it's a $1

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 1 million fueling station even if you have the hydrogen,

 2 okay.

 3 What about electric vehicles? 100 percent of

 4 electric vehicle power can be produced from solar energy.

 5 I'm proof of that, and there's hundreds more just like me.

 6 With this thing, it's going to be 20 percent of the fuel

 7 used in hydrogen cars by 2010 is supposed to come from

 8 renewable sources. The cost for a fuel cell car, $1

 9 million. The cost for IEV, $42,000. Who bore the cost?

10 Mostly for the fuel cell vehicle hundreds of millions of

11 dollars from the public purse. For my electric car,

12 funding came from us. We paid 42,000. And we were happy

13 to do that.

14 And how many vehicles are in the hands of the

15 public? One fuel cell vehicle. And the rest of them are

16 all owned by fleets.

17 What's the chance of this hydrogen highway
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18 meeting these goals? Well, already they're saying we're

19 not going to meet the 2010 goals. It's now 2020. We're

20 not even looking at the 2010 goals anymore. We already

21 had these goals made. We already did many, many times

22 more the hydrogen highway goals in clean electric cars

23 which were on the road operating in the hands of the

24 public, liked by the public, loved by the public, and

25 still in demand today. Every solar powered system we put

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 1 in, the user says, "I only wish I had a plug-in car so I

 2 could use some of the electric to be able to drive without

 3 going to the gas station."

 4 Now I'm asking you again, re-institute the

 5 battery electric portion of the zero-emission vehicle

 6 mandate. Stand up to the oil companies. Become a Board

 7 of the people, not of the auto makers. Thank you.

 8 CHAIRPERSON SAWYER: Thank you, Mr. Korthof.

 9 Ms. Whitman.

10 MS. WHITMAN: Hello. I would like to first thank

11 the Board for giving me the opportunity to speak. This is

12 a serious issue, and I hope you'll really take me serious

13 on this.

14 I provided you with some information on websites

15 to do some research. And also, Honorable Chairman, I gave

16 you a documentary film on the subject of aerosol spraying
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17 of toxic chemicals. And it also calls it chem trails. As

18 a freelance photographer, I've been videotaping this

19 activity going on in the skies in California area since

20 2004. And most recently, I found out information on the

21 Internet about chem trails. And all I can tell you is

22 that the documentation -- because everybody asks what

23 scientific documentation do you have? And I said, well,

24 there's information on the website, but I also have video

25 documentation. I've been taking videos almost every day

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 1 in Sacramento, Davis, Roseville areas of massive -- I'm

 2 not exaggerating at all when I say massive aerosol

 3 spraying by jet planes in this area.

 4 And the way I know it's toxic chemicals is

 5 because I suffer from multiple toxic chemical

 6 sensitivities. And so I can tell you basically by my

 7 symptoms what type of chemicals that I'm around. And when

 8 I go out to videotape and if I am not using a respirator

 9 mask, I get the symptoms that are consistent with what

10 they say on the website, which is barium. And barium is

11 used -- in the making a form of it in rat poisoning. It

12 effects the nervous system. And it's used in

13 pyrotechnics. Aluminum which effects short-term memory

14 loss and Alzheimer's. Titanium, which builds up in

15 tissues and silica. And sulfur hexaflouride which causes
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16 asphyxiation. These are all symptoms that are consistent

17 with the way that I feel. I usually have to go onto

18 oxygen or go into a private area with a hepa filter to

19 avoid having to go into emergency.

20 So what I am asking is that you do some research,

21 have your staff research. I have documentation, video,

22 photographs that I would like to share with you that this

23 is going on. And hopefully that you'll do some testing at

24 high levels. Maybe you can get the Governor's jet and go

25 around and follow these other jet planes around and test

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 1 what's coming out of their sources.

 2 And then also at ground level, because I'm

 3 concerned how it's affecting our ground water, our soil,

 4 our farmland. I was in the delta going from west

 5 Sacramento to Antioch and I videotaped massive aerial

 6 spraying. At one farmer I was talking with her --

 7 unfortunately I didn't have my camera with me -- and a jet

 8 flew over so low that I felt like we could reach up and

 9 almost touch it. It was a huge, white, unmarked jet

10 plane. And this is what is consistent with people

11 reporting on the Internet.

12 So I'm hoping that you'll do some scientific

13 research and notify people that they shouldn't be going

14 out and jogging and doing things when this aerosol
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15 spraying is going on.

16 And the other way so that you can identify this

17 is that a con trail from a jet plane will go by and it's

18 ice crystals. It will normally go away. These stay and

19 linger in the air and make a white haze. So when you go

20 out today, because they've been doing massive spraying,

21 you'll see what looks like overcast. But it's not. And

22 the way to identify this is you go out early in the

23 morning, look at the skies. And most times it will be

24 nice and blue. And then you'll see a jet over here and

25 it's leaving a trail that lingers all day. And one over

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 1 here, and one over here. Then by the end of the day,

 2 you'll see a white haze overcast. And I provided you with

 3 a picture that will show that.

 4 So I am just asking that you do some scientific

 5 testing and that you warn the public to not go outside

 6 when this spraying is going on and, you know, what they

 7 can do to protect themselves.

 8 So do you have any questions?

 9 CHAIRPERSON SAWYER: Thank you very much. And

10 thank you for bringing us your pictures as well.

11 MS. WHITMAN: And the video that I provided you,

12 the producer said that you can copy it. It's a

13 documentary, a video. And it was really good on it. And
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14 it's a free copy it. And if you need more copies, I can

15 provide those for you as well.

16 CHAIRPERSON SAWYER: Thank you very much.

17 MS. WHITMAN: Thank you.

18 CHAIRPERSON SAWYER: Mr. Davis.

19 MR. DAVIS: Dr. Sawyer and staff, in my

20 professional capacity I can sometimes be a little

21 abrasive. But I thought you would deserve a happy ending

22 to this day. Amber Parson was not at this meeting. She

23 is up camping in the sierras with her family. The reason

24 she wasn't at this meeting is that she's complied with

25 portable engine registration requirements and paid her

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 1 fines and all of her equipment is extremely legal. And

 2 she got tapped on the shoulder by an inspector in Placer

 3 County last week. She showed him the paperwork. They

 4 said, thank you very much, on down the door. So at least

 5 for that one contractor, this has been a very successful

 6 experience. And she asked me to thank you and all of you

 7 for that. So thank you.

 8 CHAIRPERSON SAWYER: Well, thank you very much

 9 for bringing that message. And please tell Amber Parsons

10 that she is the one that started all this as far as I'm

11 concerned, because it was her message that I sat in on

12 that raised the level of interest in this issue.
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13 MR. DAVIS: She can be your poster child now.

14 CHAIRPERSON SAWYER: Thank you.

15 That concludes the public testimony. Do we have

16 a motion for adjourn?

17 BOARD MEMBER BERG: So moved.

18 CHAIRPERSON SAWYER: And second?

19 BOARD MEMBER GONG: Second.

20 CHAIRPERSON SAWYER: The March 22nd, 2007, Air

21 Resources Board meeting is now adjourned. Thank you all

22 very much.

23 (Thereupon the California Air Resources Board

24 adjourned at 3:57 p.m.)

25

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 1 CERTIFICATE OF REPORTER

 2 I, TIFFANY C. KRAFT, a Certified Shorthand

 3 Reporter of the State of California, and Registered

 4 Professional Reporter, do hereby certify:

 5 That I am a disinterested person herein; that the

 6 foregoing hearing was reported in shorthand by me,

 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the

 8 State of California, and thereafter transcribed into

 9 typewriting.

10 I further certify that I am not of counsel or

11 attorney for any of the parties to said hearing nor in any
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12 way interested in the outcome of said hearing.

13 IN WITNESS WHEREOF, I have hereunto set my hand

14 this 4th day of April, 2006.

15

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17

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23 TIFFANY C. KRAFT, CSR, RPR

24 Certified Shorthand Reporter

25 License No. 12277

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